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Berkshire Hathaway Inc. (BRK.A - Snapshot Report)(BRK.B - Analyst Report) reported third quarter 2012 operating earnings of $1.37 per share, missing the Zacks Consensus estimate by a penny. Earnings also compared favorably with $1.54 in the year-ago quarter.

Net income (a GAAP measure), which includes a number of one-time items, came in at $1.60 per share, up from 92 cents per share earned in the year-ago quarter. The upside in earnings came on the back of profit on sale of derivative contracts.

Total revenue surged 22% year over year to $41.1 billion, led by higher revenues across all its business segments.

Segment Results

The Insurance Group segment reported revenue of $9.8 billion, up 13.2% year over year.

The Railroad, Utilities and Energy segment’s total revenue increased 7.5% year over year to $8.4 billion. Of the total segment’s revenue, approximately 63% came from Burlington Northern Santa Fe, the railroad company, which was acquired in February 2010. An increase in industrial and agricultural activity has automatically revived the demand for rail services and this translates into greater consumer demand for the segment. The trend is likely to continue in the coming years as well.

Total revenue of the Manufacturing, Service and Retailing segment climbed 13.5% year over year to $20.9 billion, on the back of an increase in Marmon, McLane Company, Other manufacturing and service and Retailing. Mc Lane’s revenue hiked 9.5% and other manufacturing, servicing and retailing, which includes a wide array of businesses, saw a 21% increase in revenue.

The Finance & Financial Products segment’s total revenue inched up 1.1% year over year to $1.00 billion. The increase was led by a 1.1% and 2.1% rise in revenue from the segment’s manufactured housing & finance and furniture /transportation equipment leasing businesses, respectively.

Berkshire’s cash holding expanded 17% year over year to $47.8 billion during the quarter.  The company continues to boost its balance sheet. Consolidated shareholders’ equity or net worth, as of September 30, 2012, was $189.1 billion, up 12.0% from December 31, 2011.

Berkshire is a conglomerate, which houses over 80 different businesses, along with equity investments in many companies. The company has seen its earnings fluctuate from one quarter to another due to heavy exposure to stock option derivatives. However, most of these gains/losses are unrealized.

All of Berkshire’s businesses – Insurance, Railroad, Utilities and Energy, Manufacturing, Service and Retailing – performed well during the quarter. Its Finance and Financial products segment, which had suffered as a result of a soft housing market, is also recovering gradually. Going forward, we expect the company to perform favorably.
 

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