Berkshire Hathaway 2Q Profit Falls 7.7% as Derivatives Loss Offsets Burlington Gain

Warren Buffett's Berkshire Hathaway (BRK-A) reported that second-quarter earnings fell 7.7% from a year earlier after a loss from derivatives more than offset operating gains from its February acquisition of railroad operator Burlington Northern Santa Fe Corp.

Net income was $2.99 billion, or $1,814 per Class-A a share, down from $3.24 billion, or $2,087, a year earlier, the company said in a statement Friday. Revenue increased 21% to $36.3 billion. Berkshire, whose companies also include GEICO, See's Candies and Dairy Queen, was expected to earn $1,677 a share on $33.7 billion in revenue, the average analyst estimate in a Thomson Reuters survey.

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The holding company took a $95 million loss on derivatives, compared to a $1.13 billion gain a year earlier, Berkshire said in a regulatory filing Friday. The loss more than offset the $1.13 billion gain in operating income from Burlington Northern Santa Fe Corp., which Berkshire acquired in February for $26.5 billion.

Overall, the company's operating earnings surged 36% to $2.79 billion, as the railroad income offset a decline in insurance earnings.

The 80-year-old Buffett made news last month by hiring 39-year-old Todd Anthony Combs to manage a "significant" part of Berkshire's investment portfolio. After falling precipitously for most of Oct. 26 on uncertainty about the new hire, Berkshire shares recovered somewhat as investors learned more about Combs.

The Berkshire chief, who was listed earlier this year by Forbes as the world's third-wealthiest person, has been bullish on the U.S. economy. Buffett said at a September conference that a second, near-term recession in the U.S. is unlikely and said his companies had recently boosted hiring. Forbes earlier pegged Buffett's financial worth at about $47 billion.