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OMAHA, Neb. (AP) — When Berkshire Hathaway Inc. releases third-quarter earnings Friday, they will be dissected by investors looking for clues about the economy's health, what CEO Warren Buffett might invest in next, as well as any estimate of Berkshire's insurance losses from Superstorm Sandy.
Investors will also be interested to see how Berkshire's BNSF Railway fared as major freight railroads grapple with weak coal demand.
But the bottom-line profit the company reports could differ significantly from the operating results for Berkshire's 80-odd businesses because the paper value of its derivatives tied to several stock-market indexes varies widely.
WHAT TO WATCH FOR: Berkshire owns several large insurance and reinsurance companies, including Geico and General Re, so it often pays out sizeable claims after any major disaster.
For instance, Berkshire recorded a $2.4 billion loss from the Sept. 11, 2001 terrorist attacks. Insurance losses from Superstorm Sandy aren't likely to be a big concern for Berkshire, which has about $40 billion cash on hand, but they will affect fourth-quarter profit.
Jeff Matthews, an investor who wrote "Secrets in Plain Sight: Business & Investing Secrets of Warren Buffett," said it will be interesting to see how BNSF fared after other railroads reported lower coal volume and increases in crude oil and automotive shipments.
Matthews expects derivative contracts to be somewhat positive for Berkshire in the quarter. Last year Berkshire recorded a $1.53 billion paper loss on its derivative contracts and investments in the third quarter.
Several Berkshire subsidiaries are tied closely to residential housing — including Shaw carpet, Acme Brick, Clayton Homes and HomeServices of America real estate — so the quarterly report will offer some insight into the U.S. housing industry's recovery.
WHY IT MATTERS: Buffett's remarkable investing track record has earned the company a devoted following. Berkshire is also watched closely because the conglomerate's results offer a glimpse into a variety of industries.
WHAT'S EXPECTED: Analysts surveyed by FactSet expect Berkshire to report earnings of $1.38 per Class B share on $39.04 billion in revenue.
LAST YEAR'S QUARTER: Berkshire's net income fell 24 percent last year to $2.28 billion, or 92 cents per share, because of a sharp decline in the paper value of its derivative contracts.
Follow Josh Funk online at www.twitter.com/funkwrite
Berkshire Hathaway Inc.: www.berkshirehathaway.com