Berkshire Hathaway’s 2nd-quarter profit jumps to $5 billion despite BNSF decline

Warren Buffett’s Berkshire Hathaway 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, Neb.-based company said Friday after the market closed. 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 for Precision Castparts, a global supplier to the aerospace industry. Those businesses have helped bolster results, as did a rebound at auto insurer Geico.

“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.

Income from the manufacturing, service and retailing segment climbed 14 percent to $1.49 billion, boosted by Precision and Duracell. That helped cushion declines at Fort Worth-based BNSF Railway and energy units.

At BNSF, profits and revenue continued to decline in the second quarter, with net earnings down 20 percent to $772 million and revenue off nearly 15 percent to $4.6 billion. In Fort Worth, Berkshire also owns Justin Brands, Acme Brick and TTI.

Results included a $610 million gain from the redemption of Buffett’s investment in Kraft Heinz preferred stock. 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.

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 acquisition.

“He’s got to do something to deploy that cash,” S&P’s Seifert said. “People are going to wonder where the next acquisition comes from.”

This story was originally published August 5, 2016 at 5:24 PM with the headline "Berkshire Hathaway’s 2nd-quarter profit jumps to $5 billion despite BNSF decline."