Warren Buffett’s Berkshire Hathaway reported a strong rebound in operating profits over the weekend, but Wall Street analysts were divided on the company’s outlook, between optimism about the insurance company’s recovery and uncertainty about its successor. The Omaha-based company said operating income from a range of businesses including insurance, railroads and energy rose 34% year over year to $13.49 billion in the third quarter. The jump was driven by underwriting income, which jumped more than 200% to $2.37 billion, reflecting lower catastrophe losses and improved performance at auto insurer Geico. Berkshire’s Class A shares were flat on Monday despite strong financial results. Berkshire stock has fallen more than 10% from its high in early May, just before Buffett announced he would step down as CEO at the end of the year, ending his legendary 60-year reign. BRK.A YTD Mountain Berkshire Class A Stock The year-to-date earnings rebound was driven by Berkshire’s cash reserves swelling to $381.6 billion, surpassing the all-time record set earlier this year. Buffett also refrained from buying back his own stock for nine consecutive months. This decision to stay on the sidelines reinforced the impression that the stock could be fully valued, even though it has lagged well behind the S&P 500 this year. KBW said Berkshire stock looks “vulnerable” after earnings, citing rich valuations and emerging management uncertainty as Buffett prepares to step down as CEO at the end of the year. The firm, which recently downgraded Berkshire stock to a sell-equivalent rating, said the stock trades at 22.2 times estimated 2026 earnings and 147% of second-quarter book value, levels that could come under pressure amid macro headwinds and “near-term earnings pressures from GEICO, investment returns, and BNSF.” CFRA’s Katherine Seifert took a more restrained view. While he praised the strong quarter, he cautioned that the 9.4% decline in insurance loss costs was not sustainable and that Berkshire’s record cash reserves without stock buybacks suggested management thought it valued the stock fairly. “At current levels, we believe the stock is fairly valued and lacks short-term momentum given the lackluster sales growth, lack of stock buybacks, and leadership changes following Warren Buffett’s departure.” Restore your confidence? Others were more optimistic. Edward Jones said incoming CEO Greg Abell is likely to “take time to restore investor confidence,” pointing to new investment activity and the possibility of stock buybacks as near-term catalysts. The firm recently upgraded Berkshire’s shares from hold to buy after a series of significant underperformance related to reports of Buffett’s retirement. UBS remained constructive, highlighting the strong insurance performance, BNSF’s improving performance and the company’s defensive posture in an uncertain economy. “We continue to believe that Berkshire’s stock is attractive in an uncertain macro environment due to its defensive business, strong cash position, and improving growth at GEICO (which should contribute to buoyancy),” the firm said. —CNBC’s Michael Bloom contributed reporting.
