(Adds earnings details, cash position, merger activity)
By Jonathan Stempel and Luciana Lopez
OMAHA, Neb. May 2 Warren Buffett's Berkshire
Hathaway Inc on Friday said quarterly profit
declined 4 percent, falling short of analyst forecasts, as
earnings from insurance underwriting declined and bad weather
disrupted shipping at its BNSF Railway unit.
Results nonetheless benefited from strength in many
businesses, including a one-third increase from underwriting at
its Geico car insurance unit, and improvement at
economically-sensitive businesses such as its Clayton Homes
mobile home unit.
First-quarter net income fell to $4.71 billion, or $2,862
per Class A share, from $4.89 billion, or $2,977, a year
Quarterly operating profit fell 7 percent to $3.53 billion,
or $2,149 per share, from $3.78 billion, or $2,302 per share.
Book value per share, Buffett's preferred measure of growth,
rose 2.6 percent from year-end to $138,426 from $134,973.
Analysts on average expected operating profit of $2,172 per
share, according to Thomson Reuters I/B/E/S.
Results were also hurt by an 80 percent drop in gains from
derivatives, mainly related to contracts whose value grows
faster when the stock market rises. Berkshire said such gains
are "often meaningless" in trying to understand the company.
"It's the medium- to long-term results that count," said
Mark O'Hare, a private investor from Brisbane, Australia. He
said the profit shortfall is "consistent with what Mr. Buffett
has always said: underwriting results will vary from year to
year. The key is that it's a profitable underwriting result."
O'Hare was speaking in Omaha, Nebraska, where Buffett and
Vice Chairman Charlie Munger are welcoming tens of thousands to
Berkshire's annual shareholder weekend, which Buffett calls
"Woodstock for Capitalists." They will field five hours of
questions on Saturday at Berkshire's annual meeting.
Some may focus on Berkshire's slowing growth, after Buffett
in 2013 missed his five-year target for the first time since
taking over the company in 1965.
Berkshire's per share net worth grew 91 percent after taxes
from 2009 to 2013, while the Standard & Poor's 500 including
dividends rose 128 percent before taxes.
The company's market value tops $316 billion. It will need
big deals, such as last year's purchase of a 50 percent stake in
ketchup maker H.J. Heinz Co, to keep growing. Heinz contributed
$177 million to first-quarter profit.
"In a quarter where the economy didn't grow, you wouldn't
expect a company that's considered by the chief executive to be
an all in bet on the U.S. economy to have stellar growth," said
Bill Smead, who runs Smead Capital Management in Seattle, which
owns $34 million of Berkshire shares.
A lack of big mergers has also driven up Berkshire's cash
stake, which rose to $48.95 billion from $48.19 billion at the
end of 2013. Buffett has said he wants a $20 billion cash
BAD WEATHER HURTS BNSF
Operating profit from insurance fell 31 percent to $1.18
billion. Much of the drop was attributable to a reinsurance
business, whose lower results reflected currency fluctuations
and the absence of a year-earlier gain.
Meanwhile, operating profit from noninsurance businesses
rose 5 percent to $2.35 billion.
This was despite a 9 percent drop at BNSF to $724 million,
which Berkshire said resulted from "severe weather conditions
and service-related challenges," especially in northern U.S.
states. Berkshire nonetheless projected that BNSF's profit for
the rest of the year will top levels in 2013.
Profit generated by Berkshire Hathaway Energy, a utility
unit that Berkshire owns most of and on Wednesday changed its
name from MidAmerican Energy, rose 15 percent to $453 million.
That unit on Thursday agreed to pay $2.9 billion for
AltaLink LP, a Calgary-based unit of SNC-Lavalin Group Inc
that provides energy transmission services in Alberta.
Overall, Berkshire revenue rose 4 percent to $45.45 billion.
Berkshire also owns tens of billions of dollars of stocks
such as American Express Co, Coca-Cola Co,
International Business Machines Corp and Wells Fargo &
Its smaller businesses sell, among other things, Benjamin
Moore paint, Borsheim's jewelry, Dairy Queen ice cream, Fruit of
the Loom underwear, Johns Manville insulation and See's candies.
In Friday trading, Berkshire Class A shares closed down
$1,173 at $192,255 after earlier hitting a record high, and the
Class B shares fell 97 cents to $128.09.
(Reporting by Luciana Lopez and Jonathan Stempel in Omaha,
Nebraska; Editing by Bernard Orr)