Wires

UPDATE 2-Buffett's Berkshire tops profit forecasts despite trade tensions

Jonathan Stempel and Shubham Kalia

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Nov 2 (Reuters) - Berkshire Hathaway Inc, the conglomerate run by billionaire Warren Buffett, on Saturday said its quarterly operating profit rose 14%, more than analysts expected, as growth in several business lines offset the drag from trade tensions and tariffs.

Results surpassed analysts' estimates, as resilience in consumer spending offset a contraction in business investment, causing U.S. economic growth to slow less than expected.

The Omaha, Nebraska-based conglomerate operates more than 90 businesses including the Geico auto insurer, BNSF railroad, Dairy Queen ice cream, Fruit of the Loom underwear, and its namesake energy company and real estate brokerage.

Berkshire said third-quarter operating income rose to $7.86 billion, or roughly $4,816 per Class A share, from $6.88 billion, or roughly $4,189 per share, a year earlier.

Analysts on average expected operating profit of $4,405.16 per share, according to Refinitiv IBES.

Net income fell 11% to $16.52 billion, or $10,119 per Class A share, from $18.54 billion, or $11,280 per share, reflecting fewer gains from Berkshire's investments.

A U.S. accounting rule requires earnings to incorporate unrealized gains even if Berkshire has no plans to sell the underlying investments. Buffett said the resulting volatility can mislead investors.

U.S. gross domestic product increased at a 1.9% annualized rate in the third quarter, the Department of Commerce said on Wednesday in its advance estimate of economic growth.

But the Federal Reserve on the same day nevertheless lowered interest rates for the third time this year amid uncertainty over trade policy, slowing global growth and Great Britain's proposed exit from the European Union.

BNSF, one of Berkshire's largest businesses, was able to post a 5% increase in profit to $1.47 billion despite a decline in revenue. Cost-cutting helped offset lower demand for consumer, coal, industrial and agricultural products, the latter in part because of new trade policies.

Berkshire also blamed U.S. tariffs for cutting into sales of industrial gas turbine and pipe products by its Precision Castparts unit.

Shares of Berkshire have lagged the broader market, in part because of Buffett's inability to deploy his company's cash and equivalents, which totaled a record $128.2 billion at the end of September.

Buffett has gone nearly four years since completing a major acquisition, forcing him to look elsewhere to invest Berkshire's cash. Berkshire has also resumed stock buybacks, and said it repurchased about $700 million of its stock in the quarter.

Class A shares of Berkshire closed Friday at $323,400, up 5.7% in 2019, lagging the 22.3% gain in the Standard & Poor's 500. Class B shares closed at $215.83, also up 5.7%. (Reporting by Jonathan Stempel in New York and Shubham Kalia in Bangalore; Additional reporting by Megan Davies in New York, Editing by Alexandra Hudson)