Warren Buffett's Berkshire Hathaway Inc (BRKa.N) (BRKb.N) on Friday said third-quarter profit fell 9 percent as it took a large writeoff on one of its investments, but operating results easily topped forecasts amid improvement in its insurance, energy and railroad operations.
Net income slipped to $4.62 billion, or $2,811 per Class A share in the third quarter, from $5.05 billion, or $3,074 per Class A share, a year earlier.
Operating profit, however, rose 29 percent to $4.72 billion, or $2,876 per Class A share, from $3.66 billion, or $2,228 per Class A share.
Analysts on average expected earnings of $2,593.85 per share, according to Thomson Reuters I/B/E/S.
Much of the drop in earnings is attributable to Berkshire posting a $107 million loss on investments and derivatives, compared with a year-earlier $1.39 billion gain.
During the quarter, Berkshire wrote off $678 million on its investment in Tesco Plc (TSCO.L), a British grocery chain being probed by regulators at home over accounting errors.
Buffett has been reducing Berkshire's Tesco stake.
In contrast, year-earlier results included big gains on investments that Buffett made during the 2008 financial crisis, including in General Electric Co (GE.N) and Goldman Sachs Group Inc (GS.N), and bonds related to candy maker Mars Inc's purchase of rival Wrigley.
Bill Smead, chief investment officer of Smead Capital Management in Seattle, said the change took a backseat to the strength of operations at Berkshire's more than 80 companies.
"There are some line items in here that just scream operating success," said Smead, whose firm owns 333,000 Class B shares of Berkshire.
Insurance premiums earned, for example, rose to $12.72 billion in the quarter from $9.27 billion in the year-ago quarter.
"The things they don't control like when they take gains worked against them," Smead said. "The things they do control, like insurance premiums, exploded."
Buffett, the world's third richest person according to Forbes magazine, has run Berkshire since 1965. He favors acquiring and investing in easy-to-understand businesses that have consistent earnings power and stable management.
In October, Berkshire agreed to buy Van Tuyl Group, the largest privately held U.S. auto dealership group. Analysts said the purchase could help Berkshire grow in related businesses, including insurer Geico.
In Friday trading, Berkshire Class A shares rose 0.1 percent to a record close of $214,970. Its Class B shares ended the day up 0.2 percent at $143.61, also a record close.
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