Warren Buffett poses with Martin the Geico gecko before Berkshire Hathaway’s annual meeting on May 3, 2024 in Omaha, Nebraska.
David A. Grogan | CNBC
Shares of Berkshire Hathaway rose on Monday after Warren Buffett’s conglomerate reported a rise in operating profits and record levels of cash.
The companys Class A Shares were 0.3% higher in morning trading. In the meantime, Class B The share recently gained around 0.4%.
These moves come after Berkshire reported operating profit of $11.22 billion in the first quarter, up 39% from the same period last year, largely due to a rise in insurance revenue. Operating profit measures revenue across all of Berkshire’s businesses.
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Berkshire Hathaway Class B
The strength of the insurance business, particularly its crown jewel Geico, comes as the sector as a whole benefits from stronger demand and greater pricing power. Insurance revenue rose to $2.598 billion, up 185% from $911 million in the year-ago quarter. Geico’s profits rose 174% to $1.928 billion from $703 million a year earlier.
Berkshire’s cash pile swelled to record levels, partly due to the holding company’s inability to find a suitable takeover target in recent years. Cash on hand rose to a record $188.99 billion in the first quarter, compared to $167.6 billion in the fourth quarter.
“We had significantly better earnings in the insurance business. And then it was almost certain that our investment income would increase,” Buffett said Saturday at the conglomerate’s annual meeting in Omaha, Nebraska. “And I said that in the annual report because the returns are so much higher than last year. And we have a lot of fixed, short-term investments that react very well to changes in interest rates.”
Berkshire Hathaway shares have already outperformed this year, with each stock class gaining more than 10%. The S&P 500 is up more than 7% this year.
Class A shares hit an all-time high this year, reaching $634,440 in March. They closed at $603,000 on Friday. Class B shares were recently priced at about $402.60 per share on Monday, about 4% below their record close of $420.52, also set in March.
However, Wall Street analysts remain positive about the company’s prospects. UBS analyst Brian Meredith rates Berkshire a “buy.” He pointed to the decline in profits and noted that Geico is on track to catch up with its competitors Progressive and others in data analytics by 2025. His price target of $734,820, raised from $722,234, is nearly 22% above where shares closed on Friday.
Edward Jones analyst James Shanahan rates Berkshire a Hold and says the current share price is already fairly valued. However, he said he continues to expect “solid returns from BRK’s diverse group of operating companies.”
Correction: UBS analyst Brian Meredith’s price target is nearly 22% higher than the stock’s closing price on Friday. A previous version incorrectly stated the percentage.
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2024-05-06 15:39:51
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