Berkshire Hathaway BRK.B released its first-quarter earnings report on May 3. Here’s Morningstar’s take on Berkshire’s earnings and stock.

Key Morningstar metrics for Berkshire Hathaway

  • Fair Value Estimate: $487.00
  • Morningstar Rating: ★★
  • Economic Moat: Narrow
  • Morningstar Uncertainty Rating: Low

What we thought of Berkshire Hathaway’s earnings

With narrow-moat-rated Berkshire Hathaway reporting adjusted first-quarter results that were about in line with our expectations, we are leaving our $730,500 per Class A share and $487 per Class B share fair value estimates in place.

First-quarter reported revenue, including unrealized and realized gains/losses from Berkshire’s investments and derivatives portfolios, declined 9.2% year over year to $83.3 billion, as $6.4 billion in investment losses and other adjustments had an impact on the company. Excluding the impact of these investment losses and other adjustments, first-quarter operating revenue declined 0.2% to $89.7 billion.

Operating earnings, exclusive of the impact of investment losses and other adjustments, declined 14.1% year over year to $9.6 billion during the March quarter. While most of the company’s segments posted solid operating earnings growth, significant losses from the Southern California wildfires during the period hit the insurance business. When including the effects of the investment losses and other adjustments, reported operating earnings decreased 63.8% to $4.6 billion from $12.7 billion in the first quarter of 2024.

Book value per share, which still serves as a decent proxy for measuring changes to Berkshire’s intrinsic value, increased 0.8% sequentially and 14.4% year over year to $455,055 (from $451,507 and $397,627 at the end of December 2024 and March 2024, respectively).

The company ended the first quarter with a record $333.3 billion in cash and cash equivalents, up from $321.4 billion at the end of last year. Free cash flow reached $6.2 billion in the quarter, and the company sold on a net basis $1.5 billion of its stock holdings and once again did not repurchase any of its own shares. Berkshire, by our estimates, had around $292 billion in dry powder—money that could be committed to investments, acquisitions, and share repurchases—at the start of the second quarter of 2025.

Our valuation of Berkshire Hathaway stock and the outlook going forward

  • Buffett’s retirement announcement was a shocker: During the final five minutes of the question-and-answer segment of this year’s annual meeting, CEO Warren Buffett surprised just about everyone when he informed the audience that he would be recommending to the board that Greg Abel take over as CEO at the end of the year. Having only discussed his retirement announcement with his children, Howard Buffett and Susie Buffett, who also serve as board directors, it came as a surprise to the other ten board members. Even Abel, who knew he would eventually succeed Buffett, seemed shocked.
  • Abel taking on role of both investor and operator: While Buffett made a point of stating in his announcement that “the final word [at Berkshire] would be what Greg said, in operations, in capital deployment, whatever it might be,” once he does retire, that weight of expectations is still going to be there for Abel. We believe he is going to have a challenging time, having to not only focus on the day-to-day operations of the business—something sorely needed after years of abdication of those responsibilities on the part of Buffett and Munger—but also its capital allocation decisions.
  • Berkshire’s share appreciation has reduced attractiveness of stock: We view the stock as slightly to modestly overvalued. Given the rally in the company’s shares last year and their rise since the start of 2025, both share classes are now trading at just over a 5% premium to our fair value estimates, which infers a mid-to-high-single-digit decline from here, should the shares revert to our estimated values.

Fair value estimate for Berkshire Hathaway

With its 2-star rating, we believe Berkshire Hathaway stock is overvalued compared with our long-term fair value estimate of $487 per share. This increase from $467 to reflect changes in our forecasts for the company’s operating businesses and insurance investment portfolio since our last update. Our new fair value estimate is equivalent to 1.49 and 1.38 times our estimates for Berkshire’s book value per share, respectively, at the end of 2025 and 2026. For some perspective, during the past five (10) years the shares have traded at an average of 1.49 (1.46) times trailing calendar year-end book value per share. We use a 9.0% cost of equity in our valuation and assume that at the very least Berkshire pays the required 15% corporate alternative minimum tax on adjusted financial statement income.

Economic Moat Rating

We’ve historically believed that Berkshire’s economic moat is more than just a sum of its parts, although the parts that make up the whole are moaty in their own regard. The insurance operations—Geico, Berkshire Hathaway Reinsurance Group, and Berkshire Hathaway Primary Group—remain important contributors to the overall business. Not only are they expected to account for 46% of Berkshire’s pretax earnings on average the next five years (and 51% of our firmwide valuation), but they are overcapitalized (maintaining a larger-than-normal equity investment portfolio for a property and casualty insurer).

They also generate low-cost float, which is the temporary cash holdings that arise from premiums being collected in advance of future claims. This allows Berkshire to generate returns on these funds with assets that are commensurate with the duration of the business being underwritten. And they have tended to come at little to no cost to Berkshire, given the company’s proclivity for generating underwriting gains the past several decades.

Financial strength

Berkshire’s strong balance sheet and liquidity are among its most enduring competitive advantages. The company’s insurance operations are well overcapitalized, carrying greater levels of equity, fixed income, and cash relative to its reserves. Berkshire generates large amounts of free cash flow and maintains significant levels of cash and cash equivalents on its balance sheet, amounting to $321.4 billion at the end of 2024.

Risk and Uncertainty

Our Uncertainty Rating for Berkshire is Low. We do not consider any environmental, social, or governance issues to be material enough to affect our uncertainty rating. This is due to the firm’s lower exposure to some of the main ESG risks inherent to the industries where it competes. Berkshire has, however, tended to score lower on governance issues because of the makeup of its board and board committees, the unequal voting structure of its Class A and Class B shares, and its lack of engagement and opaqueness on governance issues.

Berkshire faces the risk that insurance claims exceed loss reserves or that material impairments affect its investment portfolio. Several of the firm’s key businesses—insurance, energy generation and distribution, and rail transport—operate in industries subject to higher degrees of regulatory oversight, which could affect future business combinations, as well as the setting of rates charged to customers.

BRK.B bulls say

  • Book value per share, which is a good proxy for measuring changes in Berkshire’s intrinsic value, increased at an estimated 18.3% CAGR during 1965-2024, compared with a 10.4% annualized return for the S&P 500 TR Index.
  • Berkshire’s stock performance has generally been solid, increasing at a 14.9% (11.7%) CAGR during 2020-24 (2015-24), compared with a 14.5% (13.1%) average annual return for the S&P 500 TR Index.
  • At the end of 2024, Berkshire had $171 billion in insurance float. The cost of the firm’s float has been negative for much of the past two decades.

BRK.B bears say

  • Given its size, Berkshire’s biggest hurdle continues to be its ability to consistently find deals that not only add value but are large enough to be meaningful.
  • Another big issue facing the firm is the longevity of CEO Warren Buffett (who turns 95 in August 2025), especially following the death of longtime managing partner Charlie Munger in November of 2023.
  • Berkshire’s insurance business faces competitive and highly cyclical markets that occasionally produce large losses, and several of its noninsurance operations are economically sensitive and focused on US markets.

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