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Berkshire Hathaway's Earnings Surge on Heinz Deal

Strategic Insights

— 1 min read

Warren Buffett's Berkshire Hathaway saw a significant surge in net earnings during the third quarter, largely due to the company's acquisition of a controlling interest in H.J. Heinz in June. The Heinz deal contributed to earnings, while other investments, including a stake in IBM, experienced losses. The company's insurance business also reported a decline in operating profit.

Key Takeaways:

  • Berkshire Hathaway's net earnings more than doubled to $9.4 billion during the third quarter, thanks in large part to the Heinz deal.
  • The value of stock investments in the company's insurance portfolio fell 6% to $187.96 million in Q3, including stakes in IBM, Dow Chemical, and Restaurant Brands International.
  • Berkshire has a cumulative unrealized loss of about $2 billion related to its investment in IBM common stock.
  • The company's insurance business reported a 34% decline in operating profit to $414 million in Q3, due in part to an estimated loss of $130 million related to an explosion at the port of Tianjin, China.
  • Morningstar analyst Greggory Warren notes that the Heinz gain masked a lackluster quarter for Berkshire, which was affected by market volatility.
  • Keefe, Bruyette & Woods analyst Meyer Shields raised the price target guidance for B class shares to 150.21 from 139.33, but does not recommend Berkshire's stock over broader indices.

Statistics:

  • Net earnings: $9.4 billion (up from $4.2 billion in Q3 2014)
  • Value of stock investments in insurance portfolio: $187.96 million (down 6% from Q2)
  • Cumulative unrealized loss on IBM investment: $2 billion
  • Operating profit for insurance business: $414 million (down 34% from Q2)
  • Earnings contribution from BNSF railroad subsidiary: $1.16 billion (11.5% increase)
  • Earnings growth for energy and utilities company: 13% (to $786 million)
  • Total revenue: $58.99 billion (up 15.2%)

Sources:

  • Investor's Business Daily - "Berkshire Hathaway's earnings surge on Heinz deal"
  • Thomson Reuters
  • Morningstar
  • Keefe, Bruyette & Woods
  • Berkshire Hathaway - Q3 2015 earnings report
  • Statement to the Securities and Exchange Commission (SEC)
  • News release - "Berkshire Hathaway Announces Acquisition of Precision Castparts"
  • News release - "Berkshire Hathaway Enhances Stake in Phillips 66"

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