Berkshire Hathaway Profits Drop But Buffett Beats S&P 500

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NEW YORK (TheStreet) -- Berkshire Hathaway saw its operating earnings fall over 5% to $3.5 billion as insurance margins at the Warren Buffett-conglomerate dropped, crimping profits. Still, the company's first-quarter earnings indicate a continued payoff from bets Buffett has made on energy, infrastructure and an improving U.S. economy in the years since the crisis.

By Warren Buffett's preferred valuation metric, Berkshire Hathaway outperformed the S&P 500, a reversal of a trend of under-performance in recent years.

Berkshire reported $45.4 billion in revenue and net income of $4.7 billion, or net earnings per share of $2,862 per Class A share. Operating earnings were $2,149 per Class A share, generally slightly below analyst consensus.

The company was expected to earn $47.6 billion in revenue and net income of $2.2 billion, according to analyst estimates compiled by Bloomberg.

Of note, revenue at Berkshire's railroad, utilities and energy divisions rose to $9.75 billion, an over 20% rise in the first quarter from year-ago levels.

Insurance revenue, by contrast, rose marginally to $33.9 billion versus the first quarter of 2013. Overall, flat insurance revenues and rising costs meant Berkshire's net income fell slightly year-over-year.

Investment gains at Berkshire Hathaway surged to $1.059 billion for the quarter, up more than 100% from the $434 million in gains the company reported in the first quarter of 2013. Those gains were buoyed by $188 million in earnings attributable to Berkshire from its participation in the takeover of ketchup-maker H.J. Heinz, a deal announced in the first quarter of 2013.

>> Read More: Berkshire Prediction: General Electric Is On Buffett's Mind

Book value at Berkshire Hathaway increased 2.6% to $138,426 per class A share, outpacing the S&P 500's 1.3% first quarter gain. At the end of 2013, Berkshire reported that its book value per share had grown at a slower rate than the S&P 500 in the five years since the financial crisis.

Berkshire fell less than 1% in Friday trading, closing at $192,255.00.

"People are going to want reinforcement on Warrren's positive view of the United States economy," Bill Smead, chief investment officer of Smead Capital Management, said of expectations for Berkshire's annual meeting, in a telephone interview prior to earnings.