Berkshire Hathaway BRK.B released its third-quarter earnings report on Nov. 1. Here’s Morningstar’s take on Berkshire’s earnings and stock.
Key Morningstar Metrics for Berkshire Hathaway
What We Thought of Berkshire Hathaway’s Q3 Earnings
Narrow-moat-rated Berkshire Hathaway reported adjusted third-quarter operating results that were basically in line with our expectations, with the firm continuing to benefit from solid results from its insurance businesses even as other parts of the company falter.
Why it matters: Berkshire has historically offset underperformance in one or more of its segments with outperformance in others, with the firm’s insurance operations doing the heavy lifting the past several years.
- Following a period of outstanding results, the insurance operations have normalized some in 2025 as smaller price increases and higher catastrophe losses (primarily in the first quarter) have impacted underwriting results.
- BNSF continues to underperform Union Pacific, though, despite seeing another improvement in its operating ratio in the third quarter.
- Meanwhile, Berkshire Hathaway Energy saw a slight decline in the third quarter, and it continues to signal that future results may be impacted by recent legislation aimed at curbing investment in renewables.
- The manufacturing, service, and retailing division posted a slightly better quarter on the top line, with profitability improving year over year.
The bottom line: With Berkshire’s third-quarter operating results being in line with our expectations, we expect to keep our recently revised $765,000 ($510) per Class A (B) share fair value in place and view the shares as slightly to modestly undervalued.
- Excluding the impact of investment gains/losses and other adjustments, third-quarter adjusted operating revenue increased 2.1% year over year to $95.0 billion.
- Adjusted operating earnings increased 33.6% year over year to $13.5 billion, as solid insurance results were augmented by solid results across most of the firm’s operations.
- Book value per share, which serves as a decent proxy for measuring changes in Berkshire’s intrinsic value, increased 10.9% year over year to $485,429 from $437,580 at the end of September 2024.
Fair Value Estimate for Berkshire Hathaway Stock
With its 4-star rating, we believe Berkshire Hathaway’s stock is moderately undervalued compared with our long-term fair value estimate of $510 per share, which is equivalent to 1.53 and 1.38 times our estimates for its book value per share at the end of 2025 and 2026, respectively. 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% 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.
Read more about Berkshire Hathaway’s fair value estimate.
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 52% of our firmwide valuation), but they are overcapitalized (maintaining a larger-than-normal equity investment portfolio for a property and casualty insurer).
Read more about Berkshire Hathaway’s economic moat.
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 $344.1 billion at the end of June 2025.
Read more about Berkshire Hathaway’s risk and uncertainty.
BRK.B Bulls Say
- Book value per share 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 June 2025, Berkshire had $174 billion in insurance float. The cost of the firm’s float has generally been negative during 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 also large enough to be meaningful.
- Another big issue that has faced the firm has been the longevity of Buffett, especially following the death of longtime managing partner Munger in 2023.
- Berkshire’s insurance operations face competitive and highly cyclical markets that occasionally produce large losses, and several of its noninsurance operations are economically sensitive and focused on US markets.
This article was compiled by Frank Lee.
This article was generated with the help of automation and reviewed by Morningstar editors.
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