The second-quarter earnings posted over the weekend by Berkshire Hathaway (BRK.A - Get Report) , (BRK.B - Get Report) were "in line with our expectations," wrote a Morningstar Equity Research analyst following the release of the numbers -- despite some "slipping" with the firm's insurance company, Geico.
Berkshire -- run by famed investor Warren Buffett -- had posted just over $14 billion in second-quarter net earnings, up from the just about $12 billion posted the same time in the year prior.
Net earnings per average Class A share equivalent rose to $8,608, compared with $7,301 during the same quarter last year, while Class B shares came in at $5.74 per share vs. $4.87 in the second quarter of 2018.
But the company's operating profit slipped to around $6.1 billion from nearly $6.9 billion the same time in 2018, largely because it took a hit on insurance-underwriting earnings and so-called "other" earnings.
Berkshire posted $353 million in insurance-underwriting earnings earnings during the second quarter, which was a big fall from the $943 million posted the same time last year. Income listed as "other," posted a $12 million loss compared with a $432 million gain in the second quarter of 2018.
Insurance-investment income; railroad, utilities and energy; and other business all showed some gains.
Berkshire's pile of cash rose to about $122 billion from the last-reported amount of around $114.2 billion.
Morningstar said it's leaving its "fair value" estimates in place following the second-quarter results, which are pegged at $380,000 per Class A share and $253 per Class B share, saying that investment gains had offset weaker operating results over the quarter.
"Book value per share, which still serves as a decent proxy for measuring changes in Berkshire's intrinsic value, increased 4.0% sequentially to $233,977 (from $224,950 at the end of the March quarter), slightly better than our forecast of $233,948. The company closed out the June quarter with a record $122.4 billion in cash and cash equivalents, up from $114.2 billion at the end of March (and $103.2 billion at the end of June 2018)," noted analyst Greggory Warren.
Berkshire now has about "$98 billion in dry powder," added Warren, which could be used for future investments, buying other companies, share repurchases and dividends.
"That said, we were surprised by the lack of share repurchase activity (just $442 million) during the second quarter, with the firm sitting on so much cash and its shares priced as attractively as they were during the first quarter (when Berkshire bought $1.7 billion of common stock)."
Examining Berkshire's insurance operations of Geico, Berkshire Hathaway Reinsurance Group and Berkshire Hathaway Primary Group, just the latter two reported earned premium growth during the second quarter, said the analyst, noting that Berkshire saw "Geico's earned premium growth actually decelerating some from its more heady double-digit growth rates the past several years and BHPG posting a strong double-digit increase in earned premiums year over year."
After a strong first quarter, Geico "slipped some during the second quarter, with its loss ratio hitting 82.0% and its combined ratio deteriorating to 95.6%," added Warren.
Class A shares closed at $306,000 and class B shares closed at $202.67 on Friday, with the latter up slightly in after-hours trading.