Berkshire Hathaway Inc. (BRK.A; BRK.B) is a diversified holding company whose subsidiaries engage in insurance, freight rail transportation, energy generation and distribution, services, manufacturing, retailing, and other activities. Berkshire also holds a large portfolio of equity securities and derivatives, which heavily impact the company's reported financial performance.
The company's list of competitors reflects Berkshire's diverse family of businesses and includes insurance companies All State Corp. (ALL), Progressive Corp. (PGR), and Jefferies Financial Group Inc. (JEF); freight rail companies Union Pacific Corp. (UNP) and CSX Corp. (CSX); and utility and electricity companies General Electric Co. (GE) and NextEra Energy Inc. (NEE). Berkshire also competes with various manufacturers and retailers.
Key Takeaways
- Berkshire Hathaway owns businesses in insurance, rail transportation, energy generation and distribution, manufacturing, and retailing.
- The company is also a large stakeholder in many prominent companies in the U.S., such as American Express and Coca-Cola.
- For Q3 2023, insurance generated the most revenue as well as the most earnings before taxes.
- In Jan. 2024, Berkshire announced that it had purchased the remaining 20% interest in Pilot Travel Centers LLC (PTC) on top of its previous stake, making Berkshire the sole owner of PTC, owning 100% of the company.
Berkshire Hathaway’s Financials
Berkshire announced in Nov. 2023 its financial results for its third quarter of 2023, which ended Sept. 30, 2023. Total revenue attributable to its core business operations rose 21.2% to $93.2 billion from the same period in 2022. However, including losses of $29.8 billion made on its investment and derivative contracts, the company's revenue dropped to $63.4 billion.
As of changes made to GAAP in 2018, the company is required to include unrealized gains and losses arising from changes in its investment portfolio in its reported earnings. This accounting change contributes to the company's earnings being significantly more volatile than they otherwise would be.
Berkshire's net loss attributable to its shareholders rose 356% to $12.8 billion in Q3 2023. Earnings before taxes (EBT), which the company uses as a profitability metric for its individual business segments, was a loss of $17 billion in Q3 2023, up 298% compared to the same period the previous year.
While the company generated solid revenues from its insurance and railroad, utilities, and energy businesses, its losses on investments resulted in a big hit to revenues. A bulk of the losses came from a large decline in Apple stock. Additionally, the company experienced significantly higher costs in its utilities and energy segment this quarter.
Berkshire Hathaway’s Business Segments
Berkshire provides a breakdown of seven major business segments for revenue and EBT, a measure of profitability before income taxes. Total revenue and EBT for these segments in Q3 2023 were $93.2 billion and $12.1 billion, respectively, which does not include gains and losses from Berkshire's portfolio of investments and derivatives.
To reconcile the company's total business segment revenue with its total consolidated revenue mentioned in the above section of this article, a "corporate, eliminations, and other" adjustment of $11 million must be subtracted from the business segment revenue of $93.2 billion.
The below results look at revenue before taking into account "corporate, eliminations, and other," and EBT before taking into account investment losses.
Insurance
Berkshire's underwriting businesses include:
- GEICO, private passenger automobile insurance
- Berkshire Hathaway Primary Group, property and casualty policies for commercial accounts
- Berkshire Hathaway Reinsurance Group, for excess-of-loss, quota-share, and facultative reinsurance
- The insurance business also includes investment income
Revenue grew by 18.9% in Q3 2023 to $24.3 billion and EBT grew by 1,433% to $5.9 billion. Revenue from Insurance comprised 26% of the total and EBT about 49.2% of earnings.
BNSF Railway
Burlington Northern Santa Fe (BNSF), Berkshire's freight rail transportation business, operates one of the largest systems in North America. BNSF Railway ships coal as well as consumer, industrial, and agricultural products.
BNSF Railway's revenue fell 12.6% in Q3 2023 to $5.8 billion and EBT fell 14.6% to $1.6 billion. Rail transport comprised 6.3% of Berkshire's total revenue and generated 13.3% of total EBT.
Berkshire Hathaway Energy
Berkshire Hathaway Energy is a global energy company with subsidiaries that generate and distribute energy and engage in real estate brokerage activities.
The segment's revenue fell by 3.7% in Q3 2023 to $7.3 billion and EBT fell by 111% to a loss of $147 million. Revenue comprised 7.8% of companywide revenue and EBT did not contribute to earnings due to the loss.
Manufacturing
Berkshire's manufacturing businesses fall into three categories: industrial products, building products, and consumer products.
Manufacturing revenue grew 0.92% in Q3 2023 to $19.2 billion and EBT rose 6.7% to $3.1 billion. Manufacturing accounted for 20.6% of total revenue and 25.5% of total EBT.
McLane Company
McLane is a wholesale distributor that serves businesses including convenience stores, discount retailers, wholesale clubs, pharmacies, and more. It's separated into three units: grocery distribution, foodservice distribution, and beverage distribution.
Revenue fell by 0.68% in Q3 2023 to $13.5 billion and EBT grew by 3.6% to $116 million. McLane comprises 14.5% of total revenue but only 0.96% of EBT.
Pilot Travel Centers (PTC)
PTC operates travel centers in North America under the brand names "Pilot" or "Flying J" and has more than 750 travel centers across 44 states and six provinces in Canada. The company is also involved in wholesale fuel and fuel marketing platforms.
A controlling interest in PTC was acquired by Berkshire in 2023 so there is no comparison data for the same period the year before. In Q3 2023, the segment made up 14.1% of revenues and 2.4% of EBT.
Service and Retailing
The service businesses include grocery and food service distribution, professional aviation training, fractional aircraft ownership, and distribution of electronic components as well as media businesses and logistics businesses.
The retail businesses include automotive products, home furnishings, and other operations that sell various consumer products.
Segment revenue rose 4% in Q3 2023 to $9.9 billion and EBT fell by 1.3% to $1.2 billion. The segment comprised 10.7% of total revenue and 9.8% of total EBT.
Investment and Derivative Gains and Losses
Berkshire Hathaway also owns a large portfolio of equity securities and derivatives. Its concentrations are in Apple Inc. (AAPL), Bank of America Corp. (BAC), Coca-Cola (KO), Chevron (CVX), and American Express Co. (AXP). The portfolio posted a loss of $29.8 billion in Q3 2023, compared to a loss of $13.5 billion for the same period in 2022.
Berkshire Hathaway’s Recent Developments
In Jan. 2024, Berkshire announced that it had purchased the remaining 20% interest in Pilot Travel Centers LLC. The company now owns 100% of PTC as it had purchased stakes in the company previously.
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