Buffett’s Berkshire posts solid earnings. But Wall Street doubts the stock can rally with Buffett’s exit looming
Warren Buffett’s Berkshire Hathaway reported a sharp rebound in operating profit over the weekend, but Wall Street analysts were divided on the outlook for the conglomerate between optimism over its insurance rebound and succession uncertainty. The Omaha-based company said operating earnings from its collection of businesses, including insurance, railroads and energy, rose 34% from a year earlier to $13.49 billion in the third quarter . The surge was powered by a more than 200% jump in insurance underwriting income to $2.37 billion, reflecting lower catastrophe losses and improved results at auto insurer Geico. Class A shares of Berkshire were flat on Monday despite the strong results. Berkshire shares have fallen more than 10% from their high in early May, right before Buffett announced he’s stepping down as CEO at the end of the year, ending six legendary decades of control. BRK.A YTD mountain Berkshire class A shares year to date The profit rebound came as Berkshire’s cash pile swelled to $381.6 billion, surpassing the previous record set earlier this year. Buffett also refrained from repurchasing shares for a ninth straight month. This decision to stay on the sidelines reinforced the impression that the stock may be full valued, even as it significantly lags the S & P 500 this year. KBW said Berkshire’s shares look “vulnerable” post earnings, citing a rich valuation and emerging leadership uncertainty as Buffett prepares to step down as CEO at year-end. The firm, which downgraded Berkshire shares to a sell-equivalent rating recently , said the stock trades at 22.2 times estimated 2026 earnings and 147% of second-quarter book value, levels that could face pressure amid macro headwinds and “near-term earnings pressure at GEICO, investment income, and BNSF.” CFRA’s Catherine Seifert offered a more restrained view. While applauding the strong quarter, she cautioned that the 9.4% drop in insurance loss costs isn’t sustainable and that Berkshire’s record cash reserve with no buybacks suggests management sees the shares as fairly valued. “At current levels, we believe the shares are fairly valued and lack a near-term catalyst, given tepid top-line growth, absence of buybacks, and the upcoming C-suite transition as Warren Buffett steps aside,” she said. Restore confidence? Others were more upbeat. Edward Jones said incoming CEO Greg Abel is likely to “restore investor confidence over time” and pointed to renewed investment activity or potential share repurchases as possible near-term catalysts. The firm recently upgraded Berkshire to buy from hold after a stretch of sharp underperformance tied to Buffett’s retirement news. UBS remained constructive, highlighting the strength in insurance results, better performance at BNSF and the company’s defensive posture in an uncertain economy. “We continue to believe Berkshire’s shares are attractive in an uncertain macro environment with defensive businesses, a strong cash position and growth improving at GEICO (which should help float),” the firm said. — CNBC’s Michael Bloom contributed reporting.
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