Berkshire Hathaway said first-quarter profit fell 3.8 percent on reduced earnings from Chairman Warren Buffett’s derivatives wagers and underwriting at insurance businesses.
Net income slipped to $4.71 billion, or $2,862 a share, from $4.89 billion, or $2,977, a year earlier, the Omaha, Neb.-based company said Friday. Operating earnings, which exclude some investment results, were $2,149 a share, missing the $2,171 average estimate of three analysts surveyed by Bloomberg.
Buffett entered into derivatives contracts to bet on long-term gains in stocks. Fluctuations in the contracts’ value are reflected in Berkshire profit even though they don’t expire for years. Excluding those swings, the company has benefited from a rebounding U.S. economy that propelled gains in the equity portfolio and dozens of operating businesses.
The derivative book “adds volatility to earnings, although the economic risk appears manageable,” Barclays Plc analysts said in report.
Class A shares have risen 8.1 percent this year in New York, beating the 1.8 percent gain in the Standard & Poor’s 500 Index.
Continued stimulus from the Federal Reserve, a pickup in consumer spending and a recovering housing market have bolstered the U.S. economy. Berkshire stands to gain from those trends because its more than 80 subsidiaries include a railroad, a home builder, a trucking company, electric utilities, manufacturers and retailers. Berkshire owns The Buffalo News, and Buffett is the newspaper’s chairman.
Buffett, 83, has touted business prospects in the world’s largest economy, where most of Berkshire’s operations are based. He said in his annual letter to shareholders that his company has plenty of opportunity to invest in plants and equipment. Capital spending climbed to a record $11.1 billion last year.
“Though we invest abroad as well, the mother lode of opportunity resides in America,” Buffett wrote in the letter posted March 1.
Buffett will highlight the accomplishments of Berkshire managers at the company’s annual meeting today. The gathering draws tens of thousands of spectators, who come to hear him and Vice Chairman Charles Munger, 90, answer questions from shareholders, journalists and analysts.
Topics at past meetings have ranged from the operating businesses to taxes and politics. Shareholders may ask this year about why Buffett abstained from voting on Coca-Cola Co.’s executive-pay plan, which he called “excessive.” Berkshire is the soft-drink maker’s largest shareholder.