Berkshire Hathaway, led by Warren Buffett, reported a surge in operating earnings and a record cash hoard in the first quarter of 2021. This news sparked an increase in the company’s stock price, with Class A shares rising by 1.5% and Class B shares by 1.2% in premarket trading. The operating profit for the quarter reached $11.22 billion, a 39% increase compared to the same period last year, driven by strong performance in the insurance underwriting segment. This growth was particularly evident in key businesses like Geico, which saw a significant increase in earnings.
Insurance underwriting earnings rose to $2.598 billion, marking a substantial 185% increase from $911 million in the previous year. Geico recorded a 174% jump in earnings, reaching $1.928 billion from $703 million in the previous year. The entire insurance sector has been benefitting from increased demand and pricing power, contributing to Berkshire’s overall positive performance in this area. The conglomerate’s cash hoard also reached a record high of $188.99 billion in the first quarter, primarily attributed to the challenge of finding suitable acquisition targets in recent years.
Warren Buffett highlighted the improved earnings in insurance underwriting and the anticipated increase in investment income in response to changing interest rates. He emphasized that Berkshire’s fixed, short-term investments are well-positioned to benefit from higher yields. Despite already outperforming the S&P 500 this year, Berkshire Hathaway shares continue to be viewed positively by Wall Street analysts. UBS analyst Brian Meredith maintains a buy rating on the company, citing the earnings beat and optimistic outlook for Geico, which is expected to lead in data analytics by 2025.
UBS analyst Brian Meredith has set a price target of $734,820 for Berkshire, representing a 17% increase from the previous closing price. On the other hand, Edward Jones’ analyst James Shanahan has a hold rating on Berkshire, stating that the current stock price is already fairly valued. However, he anticipates solid earnings from Berkshire’s diverse operating companies. The company’s Class A shares hit an all-time high closing price this year, reaching $634,440 in March, while Class B shares were last priced at approximately $400 per share, still slightly below their record high.
Overall, Berkshire Hathaway’s strong performance in the first quarter of 2021, driven by robust earnings in insurance underwriting and record cash reserves, has garnered positive attention from investors and analysts. Despite uncertainties in the market, Buffett’s conglomerate continues to demonstrate resilience and growth potential, reinforcing its position as a leading player in various sectors. The company’s ability to adapt to changing economic conditions and capitalize on opportunities bodes well for its future prospects and long-term success.
