Berkshire Hathaway Expected to Report a Record Annual Profit

Berkshire Hathaway AGM
Daniel Acker/Bloomberg via Getty Images
By Noah Buhayar

Berkshire Hathaway (BRK-A) will probably post a record full-year profit, showing how Chairman Warren Buffett's five decades of acquisitions positioned his company to benefit from a rebounding U.S. economy.

Net income was at least $18 billion in 2013, according to analysts at Nomura Holdings. and Keefe Bruyette & Woods. That compares with $14.8 billion in 2012, the previous record. Omaha, Neb.-based Berkshire said it will release its annual report March 1 at about 8 a.m. New York time.

Buffett, 83, gained fame with equity investments in businesses like Coca-Cola (KO), which appreciated after his purchases. He expanded Berkshire through takeovers, creating a $280 billion holding company with operations ranging from auto insurer Geico to railroad Burlington Northern Santa Fe.

Investors "still think of Berkshire almost like it's a mutual fund, but that's really not true anymore," said Cliff Gallant, a Nomura analyst who estimates that full-year earnings were $18.5 billion. "Major corporations now are under its wing, and all of them are pretty strong earnings and cash-flow producers."

A pick-up in consumer spending has helped boost the U.S. economy and is laying the groundwork for further gains this year. Gross domestic product expanded at a 3.2 percent pace in the fourth quarter, Commerce Department figures showed Jan. 30.

Buffett's company stands to benefit from that trend because many of its subsidiaries count the U.S. as their largest market. Among Berkshire's more than 80 operating businesses are furniture retailers, a trucking company and a home builder. Meyer Shields of KBW estimates that Berkshire's full-year profit will climb to $18 billion.

Insurance Business

Insurance units were a big contributor to earnings last year because disaster claims fell, Gallant said. Calmer-than-average weather in 2013 helped buoy profit industrywide a year after Superstorm Sandy lashed the U.S. Northeast.

Carriers shouldered $31 billion in claims from the costliest disasters worldwide last year, compared with the $56 billion average from 2003 to 2012, according to Munich Re, the world's largest reinsurer.
Berkshire's energy and railroad units were also on pace through the first nine months of last year to eclipse their 2012 earnings. The expansion of U.S. oil drilling has helped BNSF, which hauls crude from production fields to refineries. Utility unit MidAmerican has seen its profits rise as it gained approval to increase rates in parts of its service area. The company also bought Nevada's largest utility in December.

Heinz Takeover

Profit will benefit from dividends Berkshire receives as a part of its $12.3 billion investment in H.J. Heinz. Buffett's agreement to take over the ketchup maker last year with Jorge Paulo Lemann's 3G Capital included preferred shares that pay $720 million annually.

Berkshire's Class A stock has slipped 4.2 percent this year through yesterday, compared with a decline of 0.2 percent for the Standard & Poor's 500 Index. Coke, one of Buffett's largest stock holdings, has fallen this year as the soft-drink maker faces sluggish growth outside the U.S. and concerns about the healthiness of its product at home.

The billionaire has said he focuses on increasing Berkshire's net worth rather than its stock price. On a per-share basis, the company's book value has outperformed the S&P 500 including dividends over every five-year period from when he took control of the company in 1965 through 2012. That record may have fallen at the end of 2013 because of the equity benchmark's rally since the depths of the financial crisis.

In addition to providing results, Buffett has used his annual report to opine on the economy, business and investing. He also gives shareholders a preview of what to expect at the company's annual meeting in Omaha in May, which typically draws thousands of attendees.

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To contact the reporter on this story: Noah Buhayar in New York at nbuhayar@bloomberg.net
To contact the editor responsible for this story: Dan Kraut at dkraut2@bloomberg.net

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5 Comments

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Got Dougherty

Gavin . I just agree... Brian `s remark is inconceivable... last wednesday I got a new BMW 5-series since getting a check for $8535 this month and just over 10-k last-munth . with-out any question its the easiest work Ive ever done . I actually started six months/ago and immediately began to bring in more than $87, per-hour . see post
(Home more information)
http://ow.ly/u5mCj

February 28 2014 at 1:24 AM Report abuse -1 rate up rate down Reply
militiaman2013

He should give back to all the poor families who are bound by the 1% laws to pay for his GEICO Insurance......


He is a terrible investor and lost Billions $$$ but used the insurance blood money to buy these companies which anyone with the funds could have done and done better.

Greed when is it ever enough for guys like this?

Buffet is a fraud like all 1%er's.

Certainly would be nice there was a law that made the 1% have to pay the 99%er's.

Insurance is the biggest fraud -ponzi of all time.

February 27 2014 at 9:23 PM Report abuse rate up rate down Reply
mily469

good for him.

February 27 2014 at 2:51 PM Report abuse -1 rate up rate down Reply
MaryLou

and Scottee : he gives billions to charity and employees people ---remember it is not up to the wealthy to support the rest of us and they pay 60% of all the taxes paid and people have made millions from his stocks----I love Mr Buffett---so be thankful

February 27 2014 at 2:25 PM Report abuse +1 rate up rate down Reply
1 reply to MaryLou's comment
Ray

He and the Big Bankers are stealing from the seniors and retirees of this country. Due the due diligence and math. The Federal Reserve has made it easy for these fat cats.
How much interest are you getting on your money in the bank? The wealthy don't support the rest of us. That is "nuts." Don't believe everything you read or "think." Mary Lou...you must be under 30 for sure. Keep voting for the Democrats! You will be poor the rest of your life.
You may have healtcare and food stamps but you will be POOR. How many shares of Berkshire Hathway do you own?

February 27 2014 at 2:36 PM Report abuse rate up rate down Reply
2 replies to Ray's comment
mily469

sadly anyone not speaking out against all the corruption swallowing us these last few decades is complicit with the crimes, yes even warren. and you are insane to think voting republican is going to fix anything anymore, they are digging their own grave unless old white men start reproducing multiple births asap!!!! they do love their Viagra and sadly other men more than women it seems. they just give anti gay lip service for votes from the shrinking base.

February 27 2014 at 3:12 PM Report abuse -1 rate up rate down
demcoverup

Mily you are one disturbed individual. And you're a racist bigot. What a disgrace you are. You are an embarrassment.

February 28 2014 at 11:03 AM Report abuse +2 rate up rate down