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A Mixed Quarter for Berkshire Hathaway

Weaker results from BNSF and BHE were largely offset by better results from insurance and finance and financial products.

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Wide-moat-rated  Berkshire Hathaway (BRK.B) released results for second-quarter 2016 that were basically in line with our expectations, with weaker results from BNSF and BHE being largely offset by better results from insurance and finance and financial products, as well as the addition of Precision Castparts to overall results. We are leaving our $255,000 ($170) per Class A (Class B) share fair value estimate in place.

Second-quarter (and first-half) revenue increased 6.0% (6.9%) year over year to $54.5 ($106.9) billion. That said, results looked somewhat weaker if we assume that Berkshire owned Precision Castparts all along, with second-quarter (first-half) revenue increasing just 1.3% (1.8%) year over year. On the profitability front, second-quarter pretax operating earnings increased 7.4% year over year to $6.5 billion, but would have been down 2.3% had Precision Castparts been included in results for both periods. For the first half of 2016, pretax operating earnings decreased 0.7% year over year to $12.2 billion (but would have been down 8.6% on an adjusted basis). The contribution from investments and derivatives were stronger during the second quarter (and first half of the year), which left total pretax earnings up 26.1% (2.5%) year over year. On an adjusted basis, second-quarter pretax earnings were up 14.4%, while first-half results declined 5.1%.

Greggory Warren does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.