Earnings at Buffett's Berkshire jump 70%

November 2, 2012: 6:33 PM ET
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Warren Buffett's Berkshire Hathaway reported third-quarter earnings Friday that surged more than 70% versus a year ago.

Net earnings came in at $3.9 billion, buoyed by investment gains and larger profits from the company's railroad business.

Operating earnings, which exclude some investment and derivative gains, were $3.4 billion, or $2,057 per Class A share, short of the $2,062 estimate from analysts at Thomson Reuters. Berkshire (BRKB) shares were flat in after-hours trading.

Much of Berkshire's derivatives are bets on the value of global stock indexes like the S&P 500. Berkshire's position improves when these index values rally, as they did in the third quarter. The company also booked nearly $600 million in investment gains from sales of securities and loan repayments.

Berkshire is a broad-based investment conglomerate whose holdings include everything from Geico insurance to Burlington Northern Santa Fe railroad to Dairy Queen. It also has stakes in a variety of other large firms.

Earlier Friday, Berkshire announced that it was buying Oriental Trading Company, a leading maker of party favors and novelties based in Omaha, Neb.

The price of the transaction was not disclosed, though The Wall Street Journal reported that it was a $500 million deal.

Buffett said in a recent television interview that Berkshire was interested in making acquisitions, but was finding prices for companies too high. He said low interest rates are driving up prices because other companies are more willing to use leverage to make purchases.

Berkshire uses equity or cash rather than borrowed money to buy companies, so the prices it's willing to pay don't change with interest rates.

The aging Buffett has not publicly revealed a succession plan, but says he has informed Berkshire's board about his preferred candidates. Earlier this year, he underwent radiation treatment for prostate cancer, though he said the illness was "not remotely life-threatening." To top of page

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