Berkshire Hathaway’s fourth-quarter earnings were strong but not as exceptional as they appeared, given the influence of a one-time currency gain.
While the company posted record profits, a lack of share repurchases and the inevitability of leadership transition present key concerns for investors.
Berkshire’s Class A shares closed Friday at $718,750, just below a record high, giving the company a market valuation exceeding $1 trillion. Year-to-date, the stock has climbed 6%, significantly outpacing the S&P 500’s 2% return. Despite this strong performance, Berkshire’s decision to refrain from buybacks raises questions about Buffett’s view on the stock’s valuation.
Operating profit surged 71% year-over-year to $14.5 billion, or approximately $10,000 per Class A share—far exceeding the consensus estimate of under $7,000 per share. A significant portion of the earnings boost came from robust insurance results and rising interest income on Berkshire’s record $334 billion cash hoard.
Edward Jones analyst Jim Shanahan attributed the improvement primarily to insurance underwriting gains. The quarter’s profits were further bolstered by a one-time currency gain of $1.2 billion after taxes, resulting from the appreciation of the U.S. dollar, which reduced the value of Berkshire’s yen-denominated debt. Adjusting for this, operating earnings still rose an impressive 46% to $13.3 billion.
The insurance segment, particularly Geico and reinsurance operations, was a major driver of earnings. Geico’s pretax underwriting profit more than doubled to $7.8 billion in 2024, a turnaround Buffett credited to CEO Todd Combs. However, the insurer’s underwriting profit margins, which reached nearly 20%, are unlikely to be sustainable long-term, as industry norms hover around 5%.
Other business segments delivered mixed results. Burlington Northern Santa Fe railroad’s profits declined, while Berkshire Hathaway Energy reported higher earnings. The broad category of “other controlled businesses,” which includes manufacturing, remained flat. Buffett noted that 53% of Berkshire’s 189 operating businesses experienced an earnings decline in 2024, signaling potential concerns about the broader portfolio’s performance.
Berkshire’s valuation also appears stretched. The stock trades at approximately 1.6 times its estimated year-end 2024 book value of $452,000 per share, above the historical range of 1.4 to 1.5 times book. This valuation premium likely explains the slowdown in share repurchases. In 2023, Berkshire repurchased just $2.9 billion worth of shares—the lowest amount since 2018—down sharply from $9 billion in 2023 and a record $27 billion in 2021.
For wealth advisors and RIAs, the slowing buyback pace is a critical signal. Buffett has long stated that Berkshire will only repurchase shares when he believes they are undervalued. The lack of recent buybacks suggests that he views the stock as fairly or fully valued, limiting its appeal for investors looking for value-driven capital deployment.
Another factor to consider is leadership succession. Buffett, now 94, acknowledged in his annual letter that “it won’t be long before Greg Abel replaces me as CEO.” While Abel has been identified as Buffett’s successor for some time, the transition could become a focal point for investors in the next year or two. Many view Buffett as an unparalleled steward of capital, and his departure raises questions about whether shareholders will have the same level of confidence in Abel’s leadership.
Looking ahead, wealth advisors should weigh Berkshire’s strengths—its fortress balance sheet, resilient insurance businesses, and disciplined capital allocation—against the challenges of a high valuation, limited buybacks, and impending executive transition. While Berkshire remains a solid long-term holding, its current pricing and lack of near-term catalysts suggest a more measured approach for new capital deployment.
