Berkshire Hathaway
NYSE:BRK
FY24 Results Update
Generated on: 27 February 2025, Time: 02:46 GMT
| TLDR |
|---|
| Berkshire Hathaway is an exceptionally diversified conglomerate with market-leading positions across insurance, railroads, utilities, and manufacturing, possessing unmatched financial strength that creates both defensive protection and offensive opportunities unavailable to competitors. |
| With $330.8B in cash/equivalents, minimal debt relative to capacity, and $171B in insurance float, Berkshire maintains fortress-like financial strength enabling it to withstand severe economic disruptions while capitalizing on opportunities others cannot access. |
| Operating earnings are projected to grow at 5.9% CAGR over five years, with insurance operations providing the primary growth engine supported by underwriting discipline, higher investment income, and opportunistic capital deployment despite size constraints. |
| Primary risks include leadership transition as Buffett is 94, potential catastrophic insurance losses from climate-related events exceeding models, and opportunity cost of the massive cash position if suitable investments remain scarce. |
| Berkshire offers exceptional downside protection with moderate upside potential, trading near fair value but providing significant resilience against economic turbulence, making it an attractive defensive holding rather than a growth investment. |
Financial Snapshot
| Category | Metric | Value (2024) | Value (2023) | YoY Change | Significance |
|---|---|---|---|---|---|
| Revenue | Total Revenue | $371,433M | $364,482M | +1.9% | High |
| Insurance & Other | $321,643M | $314,731M | +2.2% | High | |
| Railroad, Utilities & Energy | $49,790M | $49,751M | +0.1% | Medium | |
| Profitability | Operating Earnings* | $47,437M | $37,350M | +27.0% | High |
| Insurance-underwriting | $9,020M | $5,428M | +66.2% | High | |
| Insurance-investment income | $13,670M | $9,567M | +42.9% | High | |
| Net Earnings | $88,995M | $96,223M | -7.5% | Medium | |
| Balance Sheet | Total Assets | $1,153,881M | $1,069,978M | +7.8% | High |
| Total Liabilities | $502,226M | $499,208M | +0.6% | Low | |
| Shareholders' Equity | $649,368M | $561,273M | +15.7% | High | |
| Cash & Treasury Bills | $330,805M | $163,887M | +101.8% | High | |
| Equity Securities | $271,588M | $353,842M | -23.2% | High | |
| Cash Flow | Operating Cash Flow | $30,592M | $49,196M | -37.8% | High |
| Cash from Investing | $(10,287)M | $(32,663)M | +68.5% | Medium | |
| Income Tax Payments | $28,500M† | N/A | N/A | High | |
| Returns | ROE | 14.7%† | 18.3%† | -3.6pp | Medium |
| Float | $171,000M | $169,000M | +1.2% | High |
Summary of results
Berkshire Hathaway has undergone remarkable transformation since Warren Buffett assumed control of the struggling textile business 60 years ago, evolving into one of the world's largest and most diversified conglomerates. The company delivered exceptional performance in 2024, with operating earnings increasing 27% to $47.4 billion despite 53% of its operating businesses reporting earnings declines. Insurance operations emerged as the primary growth driver, with underwriting profits surging 66.2% to $9.0 billion and investment income rising 42.9% to $13.7 billion. The company's financial position strengthened considerably, with shareholders' equity growing 15.7% to $649.4 billion and cash plus Treasury Bills more than doubling to $330.8 billion, though this came partly through substantial reductions in equity securities holdings.
The operating environment for Berkshire's key businesses presents both challenges and opportunities. The property-casualty insurance industry is experiencing a hardening market with premium rate increases driven by rising catastrophe losses, creating favorable pricing conditions for disciplined underwriters with strong capital positions. Utility operations benefit from regulatory support for transmission investments and decarbonization initiatives, with BHE planning approximately $26 billion in transmission projects primarily in the western United States. Railroad operations face mixed conditions with recovering intermodal volumes (up 16.2%) offset by declining coal shipments (down 17.9%) and ongoing labor challenges. Manufacturing businesses confront varying sector-specific conditions, with aerospace components showing strong recovery while electronics distribution faces inventory corrections and pricing pressure.
Macroeconomically, Berkshire is uniquely positioned to benefit from the current environment. Higher interest rates have dramatically benefited insurance investment income, which nearly doubled to $11.6 billion in 2024. The company's minimal debt and conservative financial positioning stand in stark contrast to many competitors who face higher borrowing costs and refinancing challenges. Inflationary pressures, while moderating, continue to affect claims costs and pricing dynamics across many operating businesses, though Berkshire's pricing power and ownership of hard assets provide natural inflation protection. The company's diversified structure provides significant insulation from industry-specific headwinds, allowing management to direct capital toward businesses with the most favorable conditions.
The near-term outlook for Berkshire remains stable with moderate growth, as our base case projects operating earnings growing at a 5.9% CAGR over the next five years. Insurance operations will likely continue to drive performance through both underwriting discipline and higher investment income. With the stock trading near our fair value estimate of $610,700 per Class A share (versus current price of $621,640), we see balanced risk-reward with limited near-term upside but significant downside protection. Longer-term, Berkshire's success will depend heavily on three factors: leadership effectiveness following Buffett's eventual departure, disciplined deployment of the substantial cash position, and continued adaptation to evolving risks, particularly climate-related challenges in the insurance business. For investors seeking resilience against economic uncertainty rather than aggressive growth, Berkshire's combination of financial strength, business quality, and management discipline remains compelling.
Valuation Update
Berkshire Hathaway represents a unique investment proposition combining extraordinary financial strength ($330.8 billion in cash and Treasury Bills), diversified earnings across recession-resistant sectors, and a demonstrated culture of disciplined capital allocation. Our comprehensive analysis values Berkshire at $610,700 per Class A share ($407 per Class B share), indicating the stock is trading near fair value with modest 1.8% downside to current levels. The company delivered exceptional performance in 2024 with operating earnings increasing 27% to $47.4 billion, driven primarily by insurance operations where underwriting profits surged 66.2% and investment income rose 42.9% due to higher interest rates.
Looking forward, we project operating earnings growth of 5.9% annually over the next five years, with the insurance segment continuing to drive performance through both underwriting discipline and higher investment returns on float. The key investment debate centers on whether Berkshire can effectively deploy its massive cash position, projected to grow to $778.7 billion by 2029 in our base case without more aggressive acquisition or share repurchase activity. The impending leadership transition from 94-year-old Warren Buffett to Greg Abel represents both a risk to the company's acquisition appeal and an opportunity for potentially evolving capital allocation priorities. For investors seeking resilience against economic uncertainty rather than aggressive growth, Berkshire's combination of financial strength, business quality, and management discipline remains compelling despite limited near-term upside potential.
5 Insightful Takeaways
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Insurance Evolution: GEICO's transformation under Todd Combs represents a structural shift from market share pursuit to underwriting discipline, delivering a 115% increase in pre-tax profits to $7.8B in 2024. This evolution has positioned insurance operations as Berkshire's dominant earnings engine, generating 47.8% of operating earnings.
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Cash Paradox: The extraordinary $330.8B cash position (28.7% of assets) creates both unmatched downside protection and significant opportunity cost, growing to a projected $778.7B by 2029 in our base case. The pace and effectiveness of capital deployment under Greg Abel will likely determine whether this position becomes Berkshire's greatest strength or limitation.
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Succession Reality: The transition from Buffett to Abel represents less operational risk than market perception suggests, as the decentralized structure insulates operating businesses from headquarters change. However, Buffett's unique appeal to business sellers seeking a permanent home could diminish, affecting acquisition opportunities.
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Structural Advantages: Berkshire's combination of insurance float, operational autonomy, and permanent capital creates compounding advantages that persist beyond any individual leader. The insurance operations' ability to generate float at zero or negative cost provides a financing advantage competitors cannot replicate.
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Interest Rate Beneficiary: Berkshire has emerged as perhaps the greatest corporate beneficiary of higher interest rates, with interest and other investment income nearly doubling to $11.6B. Each 100 basis point change affects approximately $3.3B in annual investment income, creating both current earnings strength and optionality for future opportunities.