The key number to look for in Berkshire's Q2 results

We know Berkshire Hathaway's latest financial results, due to be released on its website tomorrow (Saturday) morning around 8 AM ET will show it bought back billions of dollars of its own shares during its second quarter, which ended on June 30.

We just don't know how many billions.

Presumably, the bigger the number, the more bullish it will be for Berkshire's stock price in the eyes of investors.

In any case, it will be far more than the $235 million Berkshire repurchased during the first quarter, and that was the first time it did any buybacks at all since 2024.

Based on the number of outstanding shares Berkshire listed in its SEC filing last month disclosing Warren Buffett's charitable gifts, Barron's estimates the Q2 buybacks will come in between $5 billion and $11 billion.

CNBC Pro reports UBS analyst Brian Meredith thinks Berkshire bought back around $8.5 billion of its shares between April 15 and July 14.

Since new CEO Greg Abel is keeping Buffett's long-standing policy of only repurchasing shares when the price is "below our intrinsic value, conservatively determined," the resumption of significant buybacks indicates he and Buffett thought the stock was relatively "cheap" this spring.

That doesn't necessarily mean, however, they still think that's the case now.

Warren Buffett Watch Graph
Berkshire shares weakened in the second quarter, with an average close for the Class B stock around $481 per share and an intraday low of $464 in mid-April.

The average close in the first quarter was $491, and it is $502 for the third quarter so far.

The stock closed at $521.80 today, 8.5% above the Q2 average close and 12.5% above the Q2 low.

 
Did Berkshire's cash reverse course?

Another important number in the report will be the size of Berkshire's cash pile and whether it declined.

Excluding BNSF's cash and subtracting T-bills payable, Berkshire had $380.2 billion as of March 31, up 3.0% from December 31.

That number has been rising in recent quarters as Buffett couldn't find anything to buy for Berkshire at an attractive price, including the company's own shares.

In the second quarter, however, buybacks resumed and Berkshire invested $10 billion in Alphabet, Google's parent.

Another big deal announced during Q2, the $6.8 billion acquisition of Taylor Morrison, did not close until July, so it may not affect the end-of-quarter cash total.

 
Positive outlook for operating earnings at key subsidiaries

Expectations for earnings at Berkshire's key operating companies are "upbeat," according to CNBC Pro.

It says UBS is expecting stronger earnings at the BNSF railroad due to increased traffic, although higher fuel prices could put a damper on margins.

UBS is also forecasting a 31% increase in pre-tax operating earnings at Berkshire Hathaway Energy.

GEICO, however, is different story. UBS thinks the insurer's underwriting margins will shrink as it pursues future growth at the expense of current profitability.

 
DaVita trim isn't the result of big moves in the stock

Berkshire Hathaway trimmed its position in DaVita a few days before shares of the dialysis provider gave back a chunk of their sizable year-to-date gains.

The sale, however, didn't have anything to do with the 23% plunge in DaVita's stock price for the week after its Tuesday Q2 earnings report revealed a decline in revenue per treatment as patients drop out of Obamacare plans due to terminations of pandemic subsidies.

Warren Buffett Watch Graph
Under a 2024 agreement with DaVita in which Berkshire agreed to keep its stake in the company at 45% or lower, DaVita is required to buy back enough shares from Berkshire once a quarter to counter any reduction in DaVita's outstanding shares due to repurchases.

DaVita's outstanding shares decreased by just 400,000 in its second quarter, so Berkshire's holding was reduced by just under 183,000 shares, making its remaining 28.7 million shares, valued at almost $5.3 billion, a 45.0% stake.

Berkshire received $36.5 million for the shares, which is a very small amount by the company's standards, so the price per share isn't very important.

It is interesting to note, however, that on July 31, the day of the transaction, DaVita closed at just over $240.

According to the Berkshire filing, however, it got just under $200 per share.

That's because the agreement stipulates the per share price is the "volume-weighted average per share price" of DaVita's public buybacks during the quarter.

Warren Buffett Watch Graph
Berkshire still came out a little bit ahead, however, as the stock is now trading just under $184.

And, looking at the bigger picture, even with this week's drop, DaVita is still up almost 62% so far this year."

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