Berkshire's $1.8 Billion Earnings Jump Had a $1.2 Billion Currency Helper

Currency improved the headline, but the operating quarter was still solid

Berkshire's second quarter was solid, not spectacular. Operating earnings rose 16% to $12.98 billion from $11.16 billion a year earlier, which is a durable improvement, but part of the headline jump came from foreign exchange. Currency moved from a $713 million foreign currency exchange loss a year earlier to a $249 million gain in the second quarter, a swing of about $1 billion. In other words, currency helped the report look stronger than it was

The underlying businesses still did fine. Berkshire cited strength in energy, railroad and manufacturing businesses that more than offset softer insurance results. BNSF railroad, energy utilities, and diverse manufacturing, service, and retailing segments largely contributed positively, while insurance remained the clearest weak spot.

Some segment numbers made that clear: - Manufacturing, service and retailing earnings jumped 24% to $4.47 billion - Berkshire Hathaway Energy's profit surged 27% to $891 million - BNSF, the company's railroad, posted a 6% increase to $1.56 billion - Underwriting earnings fell 13% to $1.73 billion

Insurance was the only clear drag. Still, all units achieved underwriting profits, so this looked more like a rough patch than a structural break.

Greg Abel's real test is what he does with Berkshire's cash

The quarter itself was respectable. What matters now is how quickly Greg Abel turns Berkshire's cash pile into long-term value per share.

Berkshire ended June with $365.5 billion in cash, down from the record level three months earlier. It also became a net buyer of equities in the second quarter with nearly $20 billion in net purchases and repurchased approximately $4.5 billion of its own shares. That buyback pace was a sharp change from the roughly $235 million spent in the first quarter.

There is at least one fair criticism. Berkshire's repurchases landed at the low end of the range it had previously disclosed, and Barron's noted about $5 billion to $11 billion as the referenced buyback range. Even so, the bigger point is the shift in direction. For a company this large, moving from minimal buybacks to meaningful ones matters, because it suggests management sees value or at least sees a job for the cash.

For long-term shareholders, that is the part that can matter most. Berkshire does not need a dramatic new story. It needs disciplined capital allocation, and steady repurchases can still improve per-share results over time.