Shares of Berkshire Hathaway (NYSE:BRKa) were up about 4% on Monday following the Saturday release of the conglomerate’s fourth quarter earnings.
The stock price of the company run by Warren Buffett hit a record high, with its B shares surging to over $500 per share.
Berkshire Hathaway easily beat estimates, with operating earnings rising about 70% year-over-year to $14.5 billion. For the full year, operating earnings climbed 26% to $47.4 billion.
When you look at the overall numbers, Berkshire’s net earnings were down 47% to $19.7 billion. But that includes returns from the company’s $267 billion stock portfolio, which are meaningless in the short-term because they are unrealized gains, or losses. And because the portfolio was down in Q4 relative to the fourth quarter of 2023, the net earnings total was down.
But that’s just a one quarter snapshot. Since Buffett took over the company in 1965, the Berkshire Hathaway stock portfolio has returned 19.9% annually, almost twice as good as the S&P 500’s 10.4% annual return with dividends included.
The more important numbers for Berkshire Hathaway are the operating earnings, which are earnings generated by its portfolio of dozens of privately held businesses that Berkshire owns, from insurers like GEICO to the ice cream shop Dairy Queen.
GEICO and insurers boost revenue
It was the insurance companies that led the way for Berkshire Hathaway in the fourth quarter, as insurance underwriting revenue surged to $3.4 billion in Q4, from $848 million in the same quarter a year ago. Investment income from insurance jumped to $4.1 billion, from $2.7 billion in Q4 2023.
Along with GEICO, Berkshire Hathaway owns several other insurers, including its own specialty reinsurance company.
GEICO was a big winner last year, as a surge in new customers led to underwriting profit doubling in 2024.
“In 2024, Berkshire did better than I expected though 53% of our 189 operating businesses reported a decline in earnings,” Buffett wrote in his annual letter to shareholders. “Our insurance business also delivered a major increase in earnings, led by the performance of GEICO. In five years, Todd Combs has reshaped GEICO in a major way, increasing efficiency and bringing underwriting practices up to date.”
Is Berkshire Hathaway stock a buy?
Berkshire Hathaway stock got a few price target upgrades from analysts after the company reported Q4 earnings. UBS increased its price target by $21 to $557 per share on the B shares, while Keefe Bruyette and Woods also increased its price target.
Berkshire Hathaway has a median price target of $516 per share, which would be about a 3% increase over the next 12 months.
The company could face some near-term challenges in insurance, with recent catastrophic events, but long-term, Berkshire Hathaway was specifically built for uncertain times like these.
The mix of businesses the company owns are mostly in sturdy, all-weather industries that are meant to perform well in all different types of markets. And the companies are mostly value-oriented, with strong management profiles, and are leaders in their field.
Berkshire Hathaway stock itself is also cheap. It is also almost always a buy, given its track record, leadership, and design. And particularly now, in these uncertain times, it can provide some nice ballast in a long-term portfolio.