Berkshire Hathaway · Manufacturing, Service & Retail

Seventy businesses, two of which barely earn anything

MSR is the industrial core of Berkshire and the largest operating segment in the valuation. It is also where a reader is most likely to be misled by a revenue figure, because nearly half of that revenue arrives at a margin of about one per cent.

Nearly half of Berkshire's Manufacturing, Service & Retail revenue arrives at a margin of about one per cent, which is why the segment's headline revenue figure is the least useful number published about it.

Anchored on the December 31, 2025 balance sheet (2025 Form 10-K) · About an 8‑minute read

Where this sits in the valuation Base case $1,069 B · this segment highlighted

$204 B estimated value 19% of the base case $94 per share$13.6 B normalised profit15× earnings6.9% earnings yield

1 Two businesses are 43% of the revenue and 5% of the profit. McLane and Pilot are distribution: enormous turnover on a margin of 1.0%. Any judgement about MSR that starts from its $214 B of revenue starts in the wrong place.
2 The Industrial line is the segment. 17% of revenue and 39% of pre-tax profit, on a margin of 18%, Precision Castparts, Marmon, IMC and Lubrizol. This is what the 15× multiple is really being applied to.
3 Return on capital is the weak point, not growth. Revenue and pre-tax profit both compounded at about 7% a year since 2006, but return on the equity these businesses carry is 7.1%, a consequence of the goodwill Berkshire paid, which never leaves the balance sheet.

Which businesses earn their keep

MSR reports in seven lines. Listed as a table of revenue and earnings, they look like seven versions of the same thing. Drawn as two scales, each line’s share of the revenue on the left, its share of the profit on the right, they separate immediately.

A line that slopes down earns less than its size suggests. A line that slopes up earns more. The two steepest descents are McLane and Pilot, and the steepest climb is Industrial.

Share of revenue against share of pre-tax profit 2025 · margin shown at right

Both columns sum to 100% of MSR. The margin beside each right-hand point is that business’s own pre-tax margin, which is what the slope is measuring. Source: 2025 Form 10-K; segment disclosures.

Why distribution looks like this. McLane delivers groceries and cigarettes to convenience stores; Pilot sells diesel. Both buy at one price and sell at a slightly higher one, so the cost of goods passes straight through the revenue line. A penny of margin on $93 B of turnover is a real business, it earned $0.9 B pre-tax, but it is not the same kind of business as the rest of the segment, and it should not be valued as though it were.

Where the revenue came from

MSR’s revenue went from $58 B in 2006 to $214 B in 2025. Almost none of that is organic growth in the businesses Berkshire owned at the start. It is acquisitions: Lubrizol in 2011, Precision Castparts in 2016, the Van Tuyl dealerships in 2015, and Pilot consolidating in 2023.

The step changes in the chart are the acquisitions arriving. The flat stretches in between are what the underlying businesses actually do.

Revenue by business line 2006–2025 · $ billions

Building Products and Consumer were not reported separately before 2012; Pilot was consolidated in 2023, which is the jump that takes the segment past 200 billion. Source: 2025 Form 10-K and prior filings.

The profit pools, side by side

The same seven lines, each on its own panel but all on one shared scale, so the comparison is honest. A panel per business makes the shape of each one visible: which have grown, which have stalled, and which arrived part-way through.

Pre-tax earnings by business line 2006–2025 · $ billions · one shared scale

One scale across all seven panels. McLane and Pilot are nearly flat lines at the bottom of their panels not because the chart is badly drawn but because that is what their earnings look like next to Industrial’s. Source: 2025 Form 10-K and prior filings.

The takeaway Industrial earned $6.8 B of the segment’s $17.5 B. Building Products added $4.0 B. Those two lines are 62% of MSR’s profit between them, and they are the reason the segment is carried at 15× and not at the low multiple distribution deserves.

The goodwill problem

MSR earns $13.6 B after tax on $193 B of carrying equity, about 7.1%. That is a poor return for a collection of good businesses, and the explanation is accounting, not operations.

When Berkshire buys a company for more than its book value, the difference sits on the balance sheet as goodwill forever. MSR’s carrying equity went from $58 B to $193 B over the period, most of it purchase price, not reinvested earnings. The businesses themselves earn good returns on the capital they actually employ; the segment earns a mediocre return on what Berkshire paid for them.

Why this matters for the valuation. It is the reason MSR is valued on an earnings multiple, not on book value or on return on equity. The question is what the $13.6 B of normalised after-tax profit is worth, not what it represents as a return on a historical purchase price.

Return on carrying equity %, MSR against BNSF and BH Energy · BHE adjusted for the BYD mark

MSR BNSF BH Energy, adjusted

BNSF carries goodwill too, and still earns roughly twice the return, a railroad bought at 1× its own replacement cost against seventy businesses bought at a premium. BH Energy earns more than either, because Berkshire built it by funding new shares instead of buying it from anyone, so there is no acquisition premium sitting in its equity. Two caveats: BNSF’s 2007–09 figures sit on standalone pre-acquisition equity and are not comparable; and BH Energy’s 2008 includes a large one-off gain from the terminated Constellation Energy acquisition. Source: 2025 Form 10-K and prior filings. BH Energy is shown excluding the mark-to-market on its BYD holding, which neither of the others has an equivalent of, the reported series is on its own page.

Carried at $204 B 15× $13.6 B profit

Per share $94 19% of base case

Pre-tax margin 8.2% $17.5 B on $214 B

Earnings yield 6.9% on the carried value

MSR, valued in parts

The valuation carries MSR as a single $204 B line at 15× profit. That headline multiple is a weighted average of seven different judgements, and the weights are what the table below makes visible: distribution gets 10×, Industrial gets 16×.

MSR sum of the parts · 2025 · $ billions
Business	Revenue	Profit	Margin	Multiple	Value	% of MSR
Industrial	$37 B	$5.2 B	14.1%	16×	$83 B	41%
Building Products	$27 B	$3.0 B	11.1%	15×	$45 B	22%
Consumer	$14 B	$1.4 B	10.0%	12×	$16 B	8%
Services	$23 B	$2.1 B	9.1%	14×	$29 B	14%
Retail	$20 B	$1.0 B	5.0%	10×	$10 B	5%
McLane	$51 B	$0.5 B	1.0%	10×	$5 B	2%
Pilot	$42 B	$0.6 B	1.4%	10×	$6 B	3%
Total MSR	$214 B	$13.6 B	6.4%	15×	$204 B	100%

Profit here is after-tax, so the margins differ from the pre-tax figures in the charts above. McLane and Pilot together are 5% of MSR’s value on 43% of its revenue. Source: 2025 Form 10-K; author’s estimates.

Download the series (.xlsx) Manufacturing, Service & Retail by business line, with sources and the date it was struck written into the file. This page’s series only; there is no combined download.