The Omaha-based company reported $3.3 billion in net income, or $2,123 per share, for the quarter ending June 30. That's up from $2.88 billion, or $1,859 per share, in the same period a year ago.
The three analysts surveyed by Thomson Reuters on average expected Berkshire to report earnings per share of $1,238.38.
"The headline number looks better because of the derivatives, but it wasn't the greatest quarter," said analyst Justin Fuller, who works with Midway Capital Research & Management in Chicago and writes about Berkshire online at http://www.buffettologist.com.
Berkshire executives typically do not comment on quarterly earnings reports, and they did not respond to an interview request on Friday.
The value of Berkshire's derivative contracts tied to equity indexes soared during the second quarter, and Berkshire recorded a mostly unrealized $1.5 billion gain on its derivatives. That result contrasts sharply with the unrealized $986 million derivative loss Berkshire recorded in the first quarter, and through the first half of 2009, Berkshire recorded an unrealized $1.7 billion loss on its derivative contracts.
Those numbers reinforce Buffett's previous warning that the derivatives will vary widely quarter-to-quarter.
On average, Berkshire's derivative contracts won't expire for another 12 years, but the company is required to estimate their value every time it reports earnings. The true value of the derivatives won't be clear for several years, but Buffett has predicted they will ultimately be profitable because Berkshire is investing the premiums.
During the second quarter, Berkshire agreed to renegotiate six of the equity-based derivatives to reduce the length of the contracts. As part of that, Berkshire reduced its potential liability on derivatives by about $1.1 billion.
Berkshire generated revenue of $29.61 billion in the quarter, down slightly from $30.09 billion a year ago.
Berkshire's two largest business segments, insurance and utilities, performed moderately well in the quarter, but most of its other subsidiaries struggled because of the weak economy.
In Berkshire's insurance businesses, which includes Geico and General Reinsurance, underwriting profit fell to $83 million from $360 million because the strength of foreign currencies hurt the value of some Berkshire reinsurance reserves that are denominated in foreign currencies such as the Euro and British Pound.
But insurance investment income offset that by increasing to $1.16 billion from $884 million.
Berkshire's utility division MidAmerican Energy Holdings Co. contributed $253 million net income in the quarter. That's 22 percent higher than the $208 million net income MidAmerican generated a year ago.
MidAmerican's results include an after-tax gain of $55 million from the sale of the last of its Constellation Energy Group Inc. stock it received when Constellation rejected a takeover bid.
