Warren Buffett poses with Martin, Geico the gecko, before Berkshire Hathaway’s annual shareholder meeting in Omaha, Nebraska, May 3, 2024.
David A. Grogan | CNBC
Berkshire Hathaway shares rose Monday after Warren Buffett’s conglomerate reported rising operating profit as well as a record cash accumulation.
companies Class A shares were up 0.3% in morning trading. Meanwhile, Class B The stock was last up about 0.4%.
The moves come after Berkshire posted first-quarter operating income of $11.22 billion, up 39% from last year, driven largely by higher insurance underwriting revenue. Operating income measures profit across all of Berkshire’s businesses.
Berkshire Hathaway Class B
The strength of the insurance business, especially its crown jewel Geico, comes as the sector as a whole benefits from higher demand and increased pricing power. Profits from insurance companies rose to $2.598 billion, up 185% from $911 million in the prior-year quarter. Geico’s profit rose 174% to $1.928 billion from $703 million a year earlier.
Berkshire’s cash reserves have surged to record levels, partly due to the holding company’s failure in recent years to find a suitable acquisition target. Cash soared to a record $188.99 billion in the first quarter, up from $167.6 billion in the fourth quarter.
“Our insurance underwriting revenues have increased significantly. And then our investment income almost certainly increased,” Buffett said Saturday at the conglomerate’s annual shareholder meeting in Omaha, Nebraska. “And I said this in the annual report because the profitability is much higher than last year. And we have a lot of fixed short-term investments that are very sensitive to changes in interest rates.”
Berkshire Hathaway shares have already outperformed this year, with every share class up more than 10%. The S&P 500 is up more than 7% this year.
Class A shares hit an all-time closing high this year, reaching $634,440 in March; they closed at $603,000 on Friday. The Class B shares were recently priced Monday at about $402.60 per share, about 4% below the record closing level of $420.52, also set in March.
However, Wall Street analysts remain positive about the company’s prospects. UBS analyst Brian Meredith recommends buying Berkshire shares, citing earnings beats and noting that Geico is on track to catch up with rivals Progressive and others in data analytics by 2025. His $734,820 price target, up from $722,234, is nearly 22% higher than where the stock closed Friday.
Edward Jones analyst James Shanahan maintained a “hold” rating on Berkshire shares, saying the stock’s current price is already fairly valued. However, it said it continues to “expect solid earnings from BRK’s diverse group of operating companies.”
Correction: UBS analyst Brian Meredith’s price target is nearly 22% above the stock’s closing price on Friday. An earlier version stated the percentage incorrectly.