Investing legend Warren Buffett’s Berkshire Hathaway (BRK.A) reported strong second quarter results. Operating earnings per share grew 37% year-over year to $2,252, nearly $500 greater than the consensus estimate. Earnings per share on a GAAP-basis fell 9% due to mark-to-market accounting on derivative contracts. Buffet sold put option contracts on several large exchanges during the financial crisis that don’t begin to expire until 2018, so these short-term swings are immaterial. Revenue increased nearly 1% to $38.5 billion, as revenue in the insurance business grew 3% to $30.8 billion.
The firm’s Railroad, Utilities and Energy segment was a standout performer, as revenue surged 5% and earnings grew 17%. Buffett’s key gauge of performance, book value, has grown 7.5% year-to-date to $107,400 per share. That figure is still short of his 15% goal, and we wouldn’t be surprised to see Buffett use his elephant gun to acquire a sizable business in the second half of the year. Berkshire has generated over $9 billion in operating cash flow during 2012, resulting in a $40 billion cash hoard.
We’re big fans of Buffett’s track record and hold his performance in the highest regard. Additionally, we think Berkshire’s massive reach provides a solid outlook on the broader economy. As Buffett detailed earlier this year, it appears the economy is growing, but not at a strong pace. Any substantial increase in economic activity should be very accretive to Berkshire’s book value going forward.