This article, originally published at 5:01 p.m. on Friday, Aug. 5, 2016, has been updated with analysts' comments and market data.
Berkshire Hathaway (BRK.A - Get Report) profit surged 25% in the three months through June as billionaire CEO Warren Buffett booked income from his purchases of aerospace equipment-maker Precision Castparts and battery manufacturer Duracell.
The acquisitions, for a total of nearly $37 billion, helped Berkshire compensate for continued pressure at its Burlington Northern railroad, where revenue dropped 14% amid declining shipments of coal, petroleum products and sand used in fracking, a segment of the U.S. oil industry hit hard by low prices.
"Our long-held acquisition strategy is to acquire businesses at sensible prices that have consistent earning power, good returns on equity and able and honest management," Omaha, Nebraska-based Berkshire said in a statement. The $32.7 billion purchase of Precision Castparts was completed on Jan. 29, while the $4.2 billion acquisition of Duracell was finished in late February.
Available cash from Buffett's insurance businesses rose nearly 1% to $61.8 billion, increasing the likelihood of another major acquisition, said Cathy Seifert, an analyst with S&P Global.
"At one point, Buffett had said, 'That's it for the big bolt-on ones,' but with that much cash they've got to deploy it,"
Seifert said in a telephone interview. "My sense is that they will be in the marketplace at some point."
Possible targets might be in the energy and finance industries, Jim Shanahan, an analyst with Edward Jones, said in a phone interview. The company rebuilt its cash stockpile much quicker than expected after the Precision Castparts purchase, he noted, thanks in part to a $610 million gain from the redemption of its preferred stock in Kraft Heinz (KHC - Get Report) .
Net income companywide was $5 billion, or $3,042 a share, while sales increased 6% to $54.5 billion as underwriting profit at Berkshire's Geico auto-insurance subsidiary nearly tripled from a year before. More policies written at higher premiums helped ease the effect of heightened claim severity, the company said.
At rival Allstate (ALL - Get Report) , which encountered similar challenges in the period, net income dropped 26%, partly because of increased collision frequency. Allstate and Hartford Insurance Group's (HIG - Get Report) both reported more accidents during the period, and Hartford cited worse injuries, which UBS analyst Brian Meredith had said might be a bad omen for other insurers.
Higher accident rates are due in part to lower gas prices, which have prompted motorists to take their cars out more often, as well as a record year for car sales in 2015. Collisions have been climbing for several quarters, S&P's Seifert said, and insurance companies have been trying to counter the trend with price increases.
"Because GEICO has a lower-cost business model, they were able to be a little more cost-competitive while still getting the rate increases that they wanted," she said. "Being a low-cost provider was definitely a benefit."
Berkshire Hathaway's stock has climbed 10% so far this year, to $218,010 a share, outpacing growth of 5.9% by the S&P 500. Still, quarterly operating earnings of $2,803 a share, which don't include gains on investments and derivatives, trailed the $2,856-a-share average of estimates from FactSet.
Profit dropped 20% to $772 million at Burlington Northern, a sprawling railroad with 33,000 miles of track running through 28 states. Revenue from freight shipments slid 14% to $1.2 billion amid declines in the volume of "petroleum products and commodities that support drilling," reflecting "pipeline displacement of U.S. crude rail traffic and lower U.S. production," Berkshire said.
Investment income of $978 million, which includes returns on Buffett's "Big Four" holdings of Wells Fargo (WFC - Get Report) , American Express (AXP - Get Report) , Coca-Cola (KO - Get Report) and IBM (IBM - Get Report) , was little changed. Both Wells Fargo and AmEx have posted year-to-date declines, while Coca-Cola has risen 1.2% and IBM has climbed 19%.
American Express has struggled to replace revenue lost with the demise of its Costco branded-card deal, while Wells Fargo has grappled with souring energy loans and prolonged low-interest rates.