Profit at billionaire CEO Warren Buffett's Berkshire Hathaway (BRK.A) fell 24% in the three months through September, as investment income fell and revenue from writing insurance policies declined.
The Omaha, Neb.-based conglomerate's net income was $7.2 billion, or $4,379 a share, topping the average estimate of $3,058 a share in a Bloomberg survey. Total revenue of $59 billion compared with estimates of $57 billion.
Underwriting profit at Berkshire's insurance businesses dropped 34%, due to higher expenses in the Geico auto business and a loss of $19 million in the Berkshire Hathaway Reinsurance Group, and revenue at Burlington Northern railroad declined.
"Berkshire is a microcosm of the broader economy," Cathy Seifert, an analyst with CFRA Research, said in a phone interview. "As the broader economy's growth has slowed, so too has Berkshire."
Profits in insurance, Berkshire's largest business, "were disappointing and even a little weaker than some peers," Seifert said, but the conglomerate benefited from stabilization in energy and utilities.
Third-quarter operating income, which doesn't include gains on investments and derivatives, was $4.9 billion, up 7% from a year ago.
Profit at Burlington Northern, the railroad Buffett purchased after the financial crisis that spans 28 states and nearly 33,000 miles, dropped 12% to $1 billion. Revenue from freight shipments declined 3.4% to $1.7 billion, and demand to ship petroleum products fell amid lower oil prices.
Income in manufacturing rose 32% to $12.1 billion, benefiting from the purchases of aerospace equipment-maker Precision Castparts and battery manufacturer Duracell earlier this year. Berkshire paid $32.7 billion for Precision Castparts, its largest purchase.
Buffett's company reported investment income of $2.1 billion, a 62% decrease from the prior year, when Berkshire benefited from a $4.4 billion holding gain on Kraft Heinz stock. The value of Buffett's stock holdings, including his "Big Four" portfolio of Wells Fargo (WFC) , American Express (AXP) , Coca-Cola (KO) and IBM (IBM) -- declined 8.2% from the end of last year to $102.5 billion.
Wells Fargo alone has fallen almost 18% so far this year as the company grapples with regulatory probes and lawsuits after disclosing that workers trying to meet sales quotes opened as many as 2 million accounts for customers without informing them.
Chairman and CEO John Stumpf retired in October, after testifying at two Congressional hearings, and the bank recently increased its estimate for litigation costs 70% to $1.7 billion. Buffett has been largely quiet about his nearly 9.5% stake in Wells Fargo.
American Express, meanwhile, is still struggling to gain traction after losing a significant co-branded deal with Costco (COST) , and Coca-Cola is down almost 3%.
Berkshire Hathaway's stock has climbed 8.5% so far this year, to $214,545 a share, outpacing growth of 2% by the S&P 500. The stock was slightly lower in after-hours trading on Friday.