Analysts raise Berkshire Hathaway targets after ‘stellar’ Geico turnaround
Berkshire Hathaway ‘s strong quarterly earnings report, aided by a recovery in insurance underwriting, prompted a slew of Wall Street analysts to raise their price targets on the conglomerate’s stock. Shares of Warren Buffett’s juggernaut got a boost of nearly 5% Monday following the firm’s earnings report Saturday. Berkshire’s operating profit — earnings from the company’s wholly owned businesses — skyrocketed 71% to $14.5 billion in the fourth quarter. Profits from insurance underwriting jumped 302% from the year-earlier period, to $3.4 billion. Auto insurer Geico had the most positive impact on Berkshire’s insurance results with pretax underwriting profits more than doubling to $7.8 billion last year. Notably, Geico increased policies in force in the second half of the year, reversing a downward trend over the past few years when it had lost market share to Progressive. “GEICO appears to have firmly turned the corner with strong sequential growth in policies in force (PIF) and continuing attractive underwriting margins,” UBS’ Brian Meredith said in a note. The analyst said Berkshire had “a strong end” to 2024, raising his 12-month price target for Class B shares to $557 from $536 previously. The new forecast represents a 11% gain from current levels around $502. Evercore ISI called Geico’s fourth quarter “stellar,” citing the acceleration in advertising spend and its ability to add policies in force. “Strong underwriting in 4Q24 shows again why P & C is Berkshire’s core business,” TD Cowen’s Andrew Kligerman said in a note. Buffett “cited Geico CEO Todd Combs’s work ‘repolishing’ BRK’s ‘long-held gem’ as responsible for the car insurer’s ‘spectacular’ improvement.” ‘An attractive stock’ Elsewhere in the earnings report, Berkshire warned that the wildfires that broke out in Southern California will lead to an estimated pre-tax loss of about $1.3 billion for its insurance business. The losses were lighter than market expectations, UBS’ Meredith said. KBW raised its earnings projections on the back of Saturday’s solid report, while hiking its price target on Class A shares to $775,000 from $750,000. The new target indicates roughly 3% upside from current levels. UBS’ Meredith, who correctly predicted last year that Berkshire would top a $1 trillion market cap, continues to believe the stock is poised to benefit from economic growth because of its cyclical businesses. But if the economy worsens, the stock could serve as a hedge due to the defensive nature of its huge insurance empire and Berkshire’s unmatched balance sheet boasting hundreds of billions in cash, he said. “We continue to believe BRK’s shares are an attractive stock in an uncertain macro environment, while insurance fundamentals remain strong and with good margin visibility,” Meredith said. — CNBC’s Michael Bloom contributed reporting.
