No. of Recommendations: 29
My summary of the 1Q results ;-)
Berkshire Hathaway reported the company’s net worth during the first quarter increased by 1.4%, or $9.8 billion, to $727.2 billion with book value equal to about $505,723 per Class A share as of 3/31/26. Berkshire boasts the largest shareholders’ equity of any U.S. company.
Net Earnings and Investment Gains
Berkshire Hathaway’s first-quarter GAAP net earnings surged to $10.1 billion, more than doubling the $4.6 billion reported a year earlier.
However, these figures remain subject to heavy volatility due to fluctuations in the market value of Berkshire's massive equity portfolio. For the quarter, the company recorded $1.2 billion in investment losses—a combination of $7.0 billion in unrealized losses offset by $5.8 billion in realized gains—representing a significant improvement over the $5.0 billion loss in the prior year period.
As of quarter-end, Berkshire’s "Big Five" holdings accounted for approximately 61% of its total equity portfolio. Performance among these core assets was mixed:
• Chevron led the group with a 37% spurt driven by rising oil prices.
• Coca-Cola also performed well, popping 9%.
• American Express faced a sharp 18% decline as Mr. Market swiped credit card companies lower during the quarter.
• Bank of America and Apple also saw pullbacks, dropping 11% and 7%, respectively.
Revenues and Operating Earnings
During the first quarter, Berkshire’s total revenues increased 4% to $93.7 billion and operating earnings jumped 18% to $11.3 billion, driven by gains in all business segments, notably in the company’s insurance businesses.
Insurance
Berkshire Hathaway’s insurance segment delivered a powerhouse performance in the first quarter of 2026, with underwriting earnings climbing 29% to $1.7 billion. This leap was primarily driven by a "catastrophe-free" quarter, a stark contrast to the $860 million in wildfire losses that dented results in Q1 2025. Despite the overall gain, GEICO’s pre-tax underwriting earnings fell 35% to $1.4 billion due to rising costs and a competitive landscape. Berkshire’s primary and reinsurance groups saw improved results during the quarter.
Insurance investment income slipped 7% to $2.7 billion, largely due to a lower interest rate environment affecting bond and cash yields. Berkshire's "all-important" insurance float—premiums held before claims are paid—grew by approximately $500 million during the quarter to reach $176.9 billion. Because underwriting was profitable, the cost of this massive $176.9 billion capital pool was effectively negative.
Railroad (BNSF)
BNSF’s quarterly revenue rose 5% to $6.0 billion, fueled by a 2.2% uptick in volume and a 2.8% rise in revenue per car/unit. The growth was spearheaded by a robust 12% surge in agricultural and energy shipments, while the increase in revenue per car reflected disciplined core pricing and higher fuel surcharges.
Even more impressive was the bottom line: net earnings chugged 13% higher to $1.4 billion. This outsized profit growth was driven by a 200-basis-point expansion in operating margin (reaching 34.4%), signaling that the railroad successfully converted modest volume gains into significant profitability through enhanced operational efficiency.
BNSF still is “working on the railroad” to improve margins further as it enviously eyes Union Pacific’s 39.5% operating margin. Katie Farmer, the company’s CEO, described at the annual meeting her plan to continue to focus on operational efficiency, technological modernization and targeted capital investments.
Energy (BHE)
Berkshire Hathaway Energy delivered a 5% revenue increase to $6.7 billion in the first quarter of 2026, although net earnings growth remained muted at 1.5% ($1.1 billion). Strong performance in natural gas pipelines and federal tax credits were largely offset by continuing headwinds in U.S. utility operations.
PacifiCorp’s cumulative wildfire loss estimates reached approximately $2.9 billion by March 31, 2026, with $2.3 billion already paid. While a recent Oregon Court of Appeals ruling in April 2026 reversed and remanded a significant verdict against the company, PacifiCorp may still face material losses beyond current accruals as litigation continues.
Manufacturing
Berkshire’s Manufacturing businesses reported revenues increased 10% to $20.7 billion for the first quarter with operating earnings up 13% to $3.1 billion.
The Industrial Products segment delivered robust results, with revenues jumping 24% to $11.2 billion and operating earnings rising 22% to $1.9 billion. While the Q1 acquisition of OxyChem provided a $1.2 billion boost to the top line, organic growth was led by IMC. Driven by accelerated customer purchasing, IMC’s revenues rose 21% to $1.2 billion, while pre-tax earnings hammered out a 42% gain. Notably, IMC’s global operations—including its significant manufacturing base in Israel—have remained resilient and unaffected by recent regional conflicts.
Building Products revenues declined 3% to $6.0 billion, with operating earnings falling 9% to $804 million. This performance was impacted by softer customer demand, driven by broader economic conditions and significant weather disruptions across parts of the U.S. during the first quarter of 2026.
The Consumer Products segment saw a 2% revenue decline to $3.5 billion, yet operating earnings motored 30% higher to $324 million. While lower sales volumes at Fruit of the Loom, Garan, Jazwares, and Forest River pressured the top line, these were partially offset by growth at Brooks and Duracell. The significant earnings expansion was driven by expense reductions at Forest River, robust sales at Brooks, and the benefit of tax credits at Duracell.
Service and Retailing
Service and Retailing revenues increased 4% during the quarter to $34.2 billion with pre-tax earnings dropping 9% to $1.2 billion.
The Service group delivered a standout performance, with revenues rising 17% to $6.4 billion and pre-tax earnings climbing 21% to $785 million. Growth was fueled by significant gains across the portfolio, including a 26% revenue surge at electronics distributor TTI, a 24% increase at IPS (data center construction services), and 12% growth in aviation services. Profitability gains were primarily driven by TTI’s strong performance, with additional contributions from the aviation sector.
Retailing group revenues eased 2% to $4.6 billion, while pre-tax earnings edged up 1% to $296 million. The revenue decline was largely driven by a 3% contraction at Berkshire Hathaway Automotive (BHA), which accounts for approximately 70% of the group’s top line. Despite lower vehicle sales, BHA’s pre-tax earnings rose 4%, bolstered by strong service contract performance and reduced operating expenses. Conversely, the group’s other retail businesses faced headwinds from increased competition and shifting consumer confidence, resulting in a collective 12% decline in earnings.
Pilot Travel Centers’ first-quarter revenues rose 8% to $11.2 billion, bolstered by higher fuel prices. However, the company reported a pre-tax loss of $50 million, as performance was pressured by lower gross fuel margins, elevated operating expenses, and losses from hedging contracts.
McLane’s revenues declined 2% to $11.9 billion, primarily reflecting lower sales volumes following the loss of several customers. Pre-tax earnings fell 20% to $144 million, driven by compressed gross margins and rising operating expenses.
Financial Position
As of March 31, 2026, Berkshire Hathaway maintains an exceptionally strong capital base of $727.2 billion, supported by significant liquidity. Excluding investments in railroads and energy, the company held $699.2 billion in total investments, with a heavy weighting toward cash and cash equivalents:
• Cash and Short-Term Investments: $373.5 billion (53.4% of non-operating investments).
• Equity Securities: $288.0 billion (41.1%), consisting of various marketable holdings.
• Equity Method Investments: $20.0 billion (3.0%), which includes significant stakes in:
o Kraft Heinz: 27.5% ownership.
o Occidental Petroleum: 26.9% ownership.
• Fixed-Income Investments: $17.7 billion (2.5%).
This massive liquidity position provides Berkshire with substantial "dry powder" for future acquisitions or market opportunities.
Free Cash Flow
During the first quarter of 2026, Berkshire generated $10.4 billion in operating cash flow and invested $5.0 billion in capital expenditures, including capital expenditures of $3.2 billion by BNSF and BHE. BNSF and BHE maintain very large investments in capital assets (property, plant and equipment) and regularly make significant capital expenditures in the normal course of business. BHE and BNSF forecast capital expenditures for the remainder of 2026 of approximately $12.4 billion. Free cash flow during the quarter declined 18% to $5.4 billion, reflecting investment-related items and higher income taxes.
During the quarter, Berkshire paid $16.0 billion to acquire equity securities and received proceeds of $24.0 billion from the sale of stocks, including the likely liquidation of many of the stocks previously managed by Todd Combs, the former investment manager who departed Berkshire. Berkshire purchased a net $1.9 billion in Treasury Bills and fixed-income investments during the quarter.
On January 2, 2026, Berkshire acquired Occidental’s chemicals business (“OxyChem”) for approximately $9.5 billion. On Feb. 15, 2026, PacifiCorp announced plans to sell part of its Washington operations for $1.9 billion in cash which is expected to close in the first half of 2027.
Share Repurchases
Berkshire Hathaway continues to repurchase shares when market prices fall below intrinsic value, as conservatively determined by CEO Greg Abel in consultation with Chairman Warren Buffett. During March 2026, the company repurchased 33 Class A shares at an average price of $729,701 and 431,462 Class B shares at an average price of $486.92. With the stock currently trading at a discount to these latest repurchase prices, long-term investors may find this an attractive entry point to buy Berkshire Hathaway.
