Can Buffett’s Berkshire make the $1 trillion milestone? Analysts weigh in

Published Mon, Feb 26 202410:07 AM ESTUpdated Mon, Feb 26 20244:29 PM EST

Wall Street analysts have a cautious view on Berkshire Hathaway , though they praised a solid earnings report over the weekend from Warren Buffett 's conglomerate. The Omaha, Nebraska-based firm on Saturday reported a 28% jump in operating earnings, rising to $8.48 billion in the fourth quarter from $6.63 billion a year ago. Operating earnings refers to profit from businesses across insurance, railroads and utilities. Berkshire also said its cash rose to a record $167.6 billion, topping its prior high of $157.2 billion held in the previous quarter. Berkshire shares slipped Monday, with Class A shares lower by 2% and Class B shares down by 1.9%. Earlier in the session, both hit all-time intraday highs. The Class A shares are already higher in 2024 by more than 13%. As of Monday's close, the conglomerate had a $887.1 billion market cap, according to FactSet data. BRK.A YTD mountain Berkshire Hathaway Class A Some Wall Street analysts are cautious on Berkshire, expecting that the stock is fairly valued as much of the strength is already priced into the stock. "BRK shares have significantly outperformed financial services peers during 2023, supported by a relatively strong earnings outlook. We continue to expect solid earnings from BRK's diverse group of operating companies," wrote Edward Jones' James Shanahan, who has a hold rating on the stock. "In our view, however, the current share price reflects these positives." Meanwhile, Keefe, Bruyette & Woods' Meyer Shields, who has a market perform rating on the stock, said strength in some businesses was offset by weakness in others. Berkshire's solid earnings reflected outperformance in auto insurer Geico, but the results were dinged by lower earnings in utilities and energy. "Given Berkshire's significant company-specific risks (mostly inevitable management transition and what we view as a gap between the perceptions and reality of Berkshire Hathaway) and ongoing macro uncertainty, we don't recommend Berkshire's stock over broader indices, and we maintain our Market Perform rating," Shields wrote Sunday. Still, Shields raised his price target to $645,000 from $610,000 for Class A shares. That represents more than 2% upside from Friday's close. Still, others were more bullish on the stock. UBS' Brian Meredith, who has a buy rating, said he continues to believe Berkshire is "an attractive stock in an uncertain macro environment and strong insurance fundamentals." However, he said he expects shares are "closer to intrinsic value," currently trading at a roughly 2% discount. CFRA's Catherine Seifert maintained a buy rating on the Class B shares, saying the earnings results "masked a turnaround in insurance profitability ($5.3B profit vs. a $30M underwriting loss) and a 52% rise in investment income." Buffett himself seemed to take a cautious view of his conglomerate, saying in his annual letter that Berkshire will only slightly outperform the average company from here on. He cited the sheer size of Berkshire, as well as the dearth of meaningful buying opportunities that would "move the needle" for the firm. "With our present mix of businesses, Berkshire should do a bit better than the average American corporation and, more important, should also operate with materially less risk of permanent loss of capital," Buffett said. "Anything beyond 'slightly better,' though, is wishful thinking." — CNBC's Michael Bloom contributed to this report.