Berkshire Q3 net up 29% on gains at railroad

NEW YORK: Northern Santa Fe. Net income rose to $5.05 billion, or $3,074 a share, from $3.92 billion, or $2,373, a year earlier, the Omaha, Nebraska-based company said on Friday in a statement. Operating earnings, which exclude some investment results, were $2,228 a share, missing the $2,403 average estimate of three analysts surveyed by Bloomberg.

Berkshire has benefited from an expanding US economy and stands to make further gains as consumer demand picks up and the housing market recovers. The company's subsidiaries haul freight, insure cars, generate electricity, make building supplies and sell products from running shoes to diamond rings.

Acquisitions and investments have positioned Berkshire to be “an all-in bet on the US,” said Bill Smead, chief executive officer of Smead Capital Management, which oversees about $680 million including shares of Buffett's company. “There’s a lot of earnings leverage.” Gains on investments including bets on Goldman Sachs Group, General Electric and Wm. Wrigley, added $1.86 billion to earnings before tax, compared with $917 million a year earlier.

Berkshire posted a $427 million gain on derivatives in the quarter, compared with a $118 million loss a year earlier. Buffett, 83, uses the contracts to wager on stock markets and the creditworthiness of borrowers. Buffett, Berkshire's chairman and CEO, exchanged warrants in Goldman Sachs and GE after the quarter for common stock. Both deals stem from investments made during the 2008 financial crisis.

Berkshire booked a profit of $680 million as Mars agreed to pay a premium to repurchase bonds that Buffett bought to help the candy company acquire Wrigley.