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 in premarket trading Monday after Warren Buffett’s conglomerate reported rising operating profit as well as a record cash accumulation.
Berkshire Class A shares were up 1.5% in premarket trading. Meanwhile, Class B The stock was last up about 1.2%.
The moves come after the conglomerate reported first-quarter operating profit of $11.22 billion, up 39% year-on-year, driven largely by higher insurance revenue. Operating income measures earnings across all Berkshire 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; it closed at $603,000 on Friday. Class B shares were last priced at about $400 a share, about 5% below the record close 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 strong earnings performance 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 17% higher than 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, he said he continues to “expect solid earnings from BRK’s diverse group of operating companies.”