Berkshire Hathaway Inc. (NYSE:BRK.A) Repurchases $5.1 Billion Stocks amid $10 Billion Impairment Charge
Berkshire Hathaway had a second-quarter to forget as its operating profit fell 10% to $5.51 billion. The company also took a $10 billion impairment charge as its airplane parts unit, Precision Castparts, came under pressure. Amidst the shocks, the conglomerate decided to return value to shareholders with a massive buy-back program.
Stock Buyback
The Warren Buffett conglomerate has since confirmed that it did repurchase $5.1 billion worth of stock in May and June. The repurchase included $4.6 billion worth of Class B stock and $486.6 million worth of Class Shares. The buyback was the biggest ever more than double the $2.2 billion purchased in 2019.
The repurchase comes at one of the worst period for Berkshire Hathaway. The conglomerate has seen most of its holdings come under pressure on the coronavirus pandemic thwarting economic activity in the U.S.
However, most of the units continue to shrug off the COVID-19 shocks seen by the $5.51 billion in operating profits. The firm’s investments in public markets increased $3.5 billion in the quarter, with net earnings surging to $26.3 billion from $14.1 billion generated a year earlier.
Berkshire Hathaway Outlook
Amid the stellar performance in the public markets, Buffett has warned investors not to be carried away by the results. Uncertainty presented by the COVID-19 pandemic could take a toll on future earnings, according to the billionaire investor. Buffett has also warned that the pandemic could hurt the company’s future earnings, cash flows, and financial condition.
Berkshire has had to adjust its investment portfolio, going from being one of the biggest shareholders in the airline industry to owning none. The sell-off came at the backdrop of growing uncertainty that the industry will remain under pressure until the coronavirus pandemic is brought under control.
Precisions Castparts, which produces spare parts for the aviation industry, has embarked on a restructuring drive in the aftermath of the COVID-19 pandemic. The firm has already cut 10,000 employees on reporting a $78 million pre-tax loss in Q2, compared to a net profit of $481 million reported last year.
