Berkshire Hathaway Q3 Profits Surge 72%; Book Value Up 11.9%

Berkshire Hathaway Q3 Profits Surge 72%; Book Value Up 11.9%
By Mark Hirschey (Work of Mark Hirschey) [CC BY-SA 2.0], via Wikimedia Commons

The ice-cream to railroad conglomerate Berkshire Hathaway Inc. (NYSE:BRK.A) (NYSE:BRK.B) said on Friday that its third quarter profits climbed 72 percent, riding on better than expected results from the railroad and utility businesses, combined with investment gains. Net income jumped to $3.92 billion, or $2,373 per share from $2.28 billion in the same quarter a year ago.

Berkshire Hathaway Q3 Profits Surge 72%; Book Value Up 11.9%

However, operating income per share, which excludes some investments, came in at $2,057, a little less than $2,062 per share estimated by analysts. Berkshire Class A shares declined less than 1 percent, or $850, to close at $130,550. Class B shares were down 75 cents to $86.91 on Friday. The company’s stocks are up 14 percent this year so far, compared to 12 percent gain in S&P’s 500 Index.

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Berkshire’s Hathaway Inc. (NYSE:BRK.A) (NYSE:BRK.B) book value, which indicates assets minus liabilities, rose 15 percent from the third quarter last year, to $111,718 per Class A share, the biggest gain since early 2010. Buffett says that book value is the best available indicator to measure his company’s intrinsic value.

Net earnings from the railroad business, Burlington Northern Santa Fe, rose 22 percent, to $937 million, from $766 million a year earlier. The growth was driven by an increase in shipping volume of coal, consumer products, and agricultural goods. Buffett acquired Burlington Northern Santa Fe in 2010 for $26.5 billion, the biggest takeover of his career.

Income from insurance underwriting fell by 64 percent to $392 million, from $1.09 billion a year ago. The investment earnings from insurance were also down 6 percent to $733 million. The underwriting profit of Geico car insurance was up from $114 million to $435 million.

MidAmerican Energy Holdings earned $438 million, compared with $372 million the third quarter last year. Profits from services, retailing, and manufacturing increased from $836 million to $991 million in the quarter that ended on September 30.

Last week, Buffett told CNBC that he is “salivating” for some major acquisitions. And, while he searches for major takeovers, his company is making smaller acquisitions. In the last few months, Buffett has acquired several newspapers, a food distributor, and a building insulation maker. His latest acquisition is Omaha-based retailer Oriental Trading for $500 million.

In its quarterly filing, Berkshire Hathaway Inc. (NYSE:BRK.A) (NYSE:BRK.B) said that it spent $1.8 billion in the last nine months on smaller acquisitions. Many of those deals are never announced publicly. The company also said that it hasn’t repurchased any shares in the first nine months of this year.

The company has a cash reserve of $47.8 billion, up from $40.7 billion at the end on second quarter this year. As of September 30, Berkshire Hathaway’s Inc. (NYSE:BRK.A) (NYSE:BRK.B) stock portfolio is valued at $88 billion.

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