Berkshire Set For Record Q3 Profit As Kraft Heinz Merger Offsets Some Investment, Insurance Losses

Warren Buffett's Berkshire Hathaway Co. is expected to report record third-quarter earnings thanks to a one-time accounting gain related to this year's merger of Kraft Heinz Co., in which it remains the biggest shareholder. The windfall may mask weakness in some of the company's many businesses.

Berkshire will record a $7 billion gain after Heinz, which Buffett invested in 2013, used shares to buy Kraft, according to reports. Berkshire, which controlled 55 percent of Heinz before the transaction, now owns 27 percent of the combined company.

Some of Berkshire's gains from its Kraft Heinz holding will be offset by paper losses in its American Express and IBM investments, according to The Motley Fool, which pointed out IBM's 11-percent decline was all in the third quarter, which would result in a big hit. Insurance -- where Berkshire owns the likes of Geico and AllState -- could also be a drag in part because low gas prices and warmer weather means more road trips, which in turn could mean more accidents, forcing insurers to raise premiums, TheStreet reported.

Still, insurance has a cushion because of its international exposure in reinsurance, TheStreet report added, as foreign-denominated insurance payments are effectively cheaper amid the dollar's recent gains. Berkshire has also been benefiting from hiring top performers from rival AIG, amid AIG's continuing issues, the report said.

Looking forward, Berkshire is expected to benefit from its $40 billion acquisitions of Precision Castparts and Duracell, when they are completed early next year, according to TheStreet.

At 85, Buffett has run Berkshire for 50 years, turning an ailing textile company into a vehicle for large, patient and mostly profitable investments in companies like The Coca-Cola Co., Goldman Sachs, Wells Fargo and Wal-Mart. He has dropped hints about a succession plan and many observers say more details on who would take over from the iconic investor could matter more than quarterly earnings.