Berkshire tops profit forecasts despite trade drag, record cash

Berkshire tops profit forecasts despite trade drag, record cash

Berkshire Hathaway released its quarterly earnings report over the weekend, revealing better-than-expected operating profits of US$7.86 billion during the third quarter, up from US$6.88 billion a year ago, on the back of strong performances from its insurance, utilities, and railroad businesses.

Stock prices also impeded the conglomerate's willingness to make a large acquisition.

Berkshire ended September with a record $128.2 billion of cash, despite repurchasing $700 million of stock in the quarter. "In the years ahead, we hope to move much of our excess liquidity into businesses that Berkshire will permanently own", Buffett wrote. "The flip side is that Berkshire's stock tends to do well when the economy softens".

Berkshire's book value rose 4% in the third quarter versus the second quarter to about $243,500 per class A share, Barron'scalculates. Seifert rates Berkshire "hold". That is generally $4,816 per Class An offer, up from $4189 per share a year sooner, and higher than the $4,405.16 per share that investigators were envisioning.

Berkshire recorded a $467 million gain on its Kraft Heinz investment during the quarter after the food company released its earnings for the first half of the year in August.

Berkshire appears to have stepped up the pace of buybacks so far in the fourth quarter based on its share count on October 24, disclosed in its 10-Q filing as about 1.629 billion class A shares (with the B shares converted to an equivalent amount of the A). Buffett has de-emphasized book value as a Berkshire yardstick, but many analysts and investors continue to track it and view it as an understated proxy for the company's intrinsic value.

Berkshire Hathaway profits in the protection business. This year, Berkshire's shares have gained 5.7% as of Friday's close, lagging the S&P 500 which has returned roughly 22%.

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But the Federal Reserve on the same day nevertheless lowered interest rates for the third time this year amid uncertainty over trade policy, slowing global growth and Great Britain's proposed exit from the European Union.

Berkshire's revenue improved 2% to $64.97 billion.

Berkshire also blamed United States tariffs for cutting into sales of gas turbine and pipe products by its Precision Castparts unit.

The company added that its Q4 results will likely be negatively impacted by losses from Typhoon Hagibis.

Warren Buffett's sprawling Berkshire Hathaway posted a 14 percent increase in quarterly profits, boosted by gains in its insurance companies and railroad business.

Profit from manufacturing, services and retailing rose 2%, to $2.46 billion, as higher sales from Berkshire's auto dealer and Clayton Homes mobile home units offset lower revenue from the Duracell battery, Forest River RV, and apparel and footwear businesses.

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