Berkshire profit surges as economy gives Buffett a boost
NEW YORK: Berkshire Hathaway Inc, the conglomerate run by billionaire Warren Buffett, said quarterly operating profit rose 67%, as insurance underwriting rebounded and several business units benefitted from a growing economy.
Results easily topped analyst forecasts. Underwriting profit at the Geico auto insurance unit more than quintupled, the BNSF railroad benefited from demand to ship consumer products, grain, petroleum and steel, and the Berkshire Hathaway Automotive car dealership financed more vehicle purchases.
“Good results across the board,” said Doug Kass, who runs the hedge fund Seabreeze Partners Management Inc in Palm Beach, Florida. He has previously sold Berkshire shares short, betting on a decline, but is not doing so now.
Berkshire also said second-quarter net income nearly tripled, though that reflected a new accounting rule requiring it to report unrealised investment gains with earnings. Buffett said the rule distorted net results and could mislead investors.
Operating profit rose to US$6.89bil, or roughly US$4,190 per Class A share, from US$4.12bil, or US$2,505 per share, a year earlier.
Analysts on average expected operating profit of US$3,387 per share, according to Thomson Reuters I/B/E/S.
Net income rose to US$12.01bil, or US$7,301 per Class A share, from US$4.26bil, or US$2,592 per share, a year earlier.
Results also reflected a decline in Berkshire’s effective income tax rate to 20% from 28.9%, following last year’s cut in the federal corporate tax rate.
Berkshire is based in Omaha, Nebraska, and has more than 90 businesses in the insurance, chemicals, energy, food and retail, industrial parts, railroad and other sectors.