Warren Buffett’s Berkshire Hathaway said second-quarter profit beat analysts’ estimates as earnings climbed at its utility business and railroad.
Net income rose to US$4.54 billion, or US$2,763 a share, from US$3.11 billion, or US$1,882, a year earlier, on gains in Buffett’s derivative bets, the Omaha, Nebraska-based company said on Friday in a filing. Operating earnings, which exclude some investment results, were US$2,384 a share, exceeding the US$2,166 average estimate of three analysts surveyed by Bloomberg.
Berkshire has benefited this year as the US economy rebounded and stocks rallied, boosting the value of Buffett’s investments. The company’s operating units, including railroad Burlington Northern Santa Fe (BNSF), auto insurer Geico and utility MidAmerican Energy Holdings, do most of their business in the country.
“As America goes, so goes Berkshire,” Meyer Shields, an analyst at Keefe, Bruyette & Woods, said in a phone interview before results were announced.
Class A shares rose 0.5 percent to US$176,500 on Friday in New York prior to the release, extending their advance to 32 percent this year. That compares with the 20 percent rise in the Standard & Poor’s 500 Index.
Net income from BNSF climbed 10 percent to US$884 million. Revenue gained about 5 percent to US$5.32 billion, on increases tied to industrial and consumer products and coal. The railroad expects capital commitments this year will be US$4.3 billion, or US$200 million more than previously disclosed, BNSF said in a separate filing.
Spending on plant and equipment, acquisitions and equities, are helping Berkshire deploy its cash pile. Buffett’s firm spent $4.64 billion on stocks in the quarter, while selling US$781 million, according to the filing. Most of the increase was in the category that Berkshire labels as “commercial, industrial and other.”
Buffett’s company has an US$8 billion preferred stake in the ketchup maker and half the common stock, or 425 million shares. Berkshire also has warrants to buy 46 million additional Heinz shares for US$0.01 each, Friday’s filing showed.
MidAmerican added US$279 million to Berkshire’s profit compared with US$253 million in last year’s second quarter on higher earnings at utility PacifiCorp and real-estate broker HomeServices of America.
Buffett’s derivative bets on stock market gains boosted earnings by US$390 million in the second quarter, compared with a loss of US$1.17 billion a year earlier. Fluctuations in the value of the contracts are recorded in net income each quarter, even though the wagers will not be settled until 2018 or later.
The insurance segment’s underwriting profit slipped 14 percent from last year’s second quarter to US$530 million as flooding in Europe boosted General Re’s claims.
Geico’s underwriting profit was US$336 million before tax.
Insurance investment income increased by about 7 percent to US$1.14 billion.