Andrew Bary

Berkshire Hathaway shares have rallied to record levels in the wake of the company's strong fourth-quarter earnings, disclosed Saturday.

Two Wall Street analysts -- Meyer Shields of KBW and Brian Meredith of UBS -- raised their price targets on the stock.

Berkshire Hathaway's Class A shares are up 3.1% to $741,090, while the Class B stock is up 3.2% to $494.21. The Class A shares now have risen 9% so far this year, way ahead of the S&P 500 index, which has gained 2%. Berkshire Hathaway, as the largest value stock in the index, may be getting a lift Monday as investors rotate out of growth stock highfliers such as Palantir Technologies.

Berkshire Hathaway reported record operating earnings after taxes of $14.5 billion for the fourth quarter, up 71% from the year earlier period. The earnings amounted to about $10,100 per Class A share, 40% higher than the consensus estimate.

Even adjusting for a one-time currency gain in the period, Berkshire Hathaway's operating profits were up over 40% to $13.3 billion. The profit gain was driven mostly by strength in Berkshire Hathaway's huge insurance business, notably Geico, which has undergone a major turnaround over the past two years.

"Geico appears to have firmly turned the corner with strong sequential growth in policies in force and continued attractive underwriting margins," wrote UBS analyst Brian Meredith. Geico's underwriting margin was about 19% in the period and for the year, way ahead of its target of around 5%.

Meredith, who has a Buy rating on the stock, lifted his price target on the Class A shares to $836,135 from $803,444. He boosted his 2025 earnings estimate to $31,565 from $30,297 per Class A share, a roughly 5% increase. Berkshire Hathaway now trades for about 23 times that estimate.

Shields boosted his price target on Class A stock to $775,000 from $750,000, and lifted his earnings-per-share estimate for 2025 to $31,600 from $30,140. He maintains a Market Perform rating on the stock.

"BRK.A shares currently trade at 22.0 times our estimated 2026 earnings per share, and 159% of fourth-quarter 2024 BVPS (book value per share), which we think fully reflects its earnings prospects, especially given ongoing macro uncertainty and its unique management succession risks," Shields wrote.

Berkshire Hathaway CEO Warren Buffett, 94, wrote in his shareholder letter that "it won't be long before Greg Abel replaces me as CEO." Abel, 62, is a veteran Berkshire Hathaway executive.

Berkshire Hathaway is trading at a high valuation relative to recent years based on book value. It's trading for more than the 1.6 times book value on Dec. 31 of about $452,000 per Class A share; the range generally has been 1.4 to 1.5 times in recent years.

Meredith pegs intrinsic value at about $710,000 per Class A share, 3% below the current price, compared with an average discount of 18% since 2018. Buffett says intrinsic value is the key Berkshire Hathaway valuation metric, but he doesn't disclose his estimate of it.

Write to Andrew Bary at andrew.bary@barrons.com

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February 24, 2025 11:30 ET (16:30 GMT)

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