Warren Buffett’s Berkshire Hathaway Inc. said second-quarter profit rose 25 percent on earnings from newly acquired manufacturing businesses and improved results at insurance operations.
Net income climbed to $5 billion from $4.01 billion a year earlier, the Omaha, Nebraska-based company said Friday in a statement. Operating earnings, which exclude some investment results, were $2,803 a share, missing the average $2,911 estimate of three analysts surveyed by Bloomberg.
Berkshire’s businesses represent a cross-section of the economy and provide Buffett, 85, with a steady stream of cash for more investments. Since the start of the year, he’s added to the company’s manufacturing operations, completing deals for battery-maker Duracell and Precision Castparts Corp., a global supplier to the aerospace industry. Those businesses helped bolster results, as did a rebound at auto insurer Geico, even as earnings slumped at the company’s railroad and energy businesses.
“It’s an insurance-based conglomerate and the insurance underwriting turned around at a time when a lot of the peer group saw a deterioration,” said Cathy Seifert, an equity analyst at S&P Global Market Intelligence.
Share Gain
Berkshire shares have climbed 10 percent this year to $218,010 at 4 p.m. in New York compared with the 6.8 percent gain in the S&P 500 Index. The statement was released after the close of regular trading.
Results were also helped by a $610 million gain from the redemption of an investment in Kraft Heinz Co. preferred stock. Buffett has long told shareholders that they should focus on the underlying earnings of Berkshire’s operating businesses, rather than gains or losses on securities that are reflected in the company’s income statement.
Book value, a measure of assets minus liabilities, rose to $160,009 per share at the end of June from $157,369 three months earlier.
The insurance businesses posted an underwriting gain of $337 million, rebounding from a loss of $38 million a year earlier. Pretax underwriting profit almost tripled at the Geico unit to $150 million as the auto insurer added customers and increased rates. The namesake reinsurance operation benefited from currency fluctuations, posting a $184 million profit, compared with a loss a year earlier.
Duracell, Precision
It was a rough quarter for other large U.S. property-and-casualty insurers. Hartford Financial Services Group Inc. was hurt by an increase in claims costs for auto policies, while Travelers Cos. said that wildfires in Canada and other natural disasters crimped earnings.
Income from Berkshire’s manufacturing, service and retailing segment climbed 14 percent to $1.49 billion, boosted by Precision and Duracell. Other major manufacturing businesses — including chemical unit Lubrizol and toolmaker Iscar — posted a decline in profit. Industrial products subsidiaries “may take additional cost containment actions in response to further slowdowns in customer demand,” Berkshire said in a regulatory filing. Luxury aviation unit NetJets reported lower revenue.
One of Berkshire’s biggest businesses, railroad BNSF, saw profit drop 20 percent to $772 million. Results were hurt by a decline in the volume of coal and petroleum-product shipments, and a decrease in revenue from agricultural cargo.
Stocks, Cash
Profit at the utility unit, Berkshire Hathaway Energy, fell to $482 million from $502 million a year earlier. The business operates electric grids in the U.K., natural gas pipelines that stretch from the Great Lakes to Texas and power companies in states including Iowa and Nevada.
Berkshire’s stock portfolio was valued at $104.2 billion at the end of the second quarter, down from $106.4 billion on March 31. Some of Buffett’s biggest holdings — including Wells Fargo & Co., American Express Co. and Phillips 66 — declined in the quarter.
The cash pile climbed to $72.7 billion as of June 30 from $58.3 billion three months earlier, helped by Kraft Heinz’s redemption of preferred shares for about $8.3 billion. The extra funds add to Buffett’s resources for another major takeover.
“They’re generating a lot of cash,” said Jim Shanahan, an analyst at Edward Jones. “They’re in a really good position to make another large acquisition.”