Warren Buffett’s Berkshire Hathaway has caught the attention of a new Wall Street analyst, and his views on the conglomerate are a mixed bag. TD Cowen’s Andrew Kligerman recently initiated coverage on the Omaha-based giant with a hold rating, along with a 12-month price target of $697,000. This target represents a potential 7% gain from its current value.
Kligerman’s analysis highlights some key challenges that Berkshire Hathaway is currently facing. He points out weaknesses in the conglomerate’s non-insurance businesses, such as its railroad, utilities service, and retail sectors. On the other hand, Berkshire’s insurance operations continue to perform well, serving as a bright spot for the company.
The analyst notes that Berkshire’s railroad arm, BNSF, has been dealing with wage increases and revenue declines. Additionally, the utility business, BHE, is under pressure due to damage caused by wildfires. The manufacturing, service, and retailing businesses are also closely tied to the U.S. economy, which is currently grappling with inflationary pressures.
Despite these challenges, Berkshire’s insurance business has been a standout performer for the conglomerate. In the first quarter, it reported a significant 185% year-on-year increase in insurance underwriting earnings, driven largely by the success of auto insurer Geico. The upcoming second-quarter earnings report will provide further insight into the company’s overall performance.
Investors have taken notice of Berkshire’s resilience, with its stock rallying more than 20% so far this year, outperforming the broader market. However, it is worth noting that Berkshire Hathaway is not a heavily covered stock on Wall Street, with only seven analysts from major equity research firms providing coverage. Of these analysts, four have a buy-equivalent rating on the stock, while four have a hold rating.
In conclusion, Warren Buffett’s Berkshire Hathaway continues to navigate a complex business landscape, with both challenges and opportunities on the horizon. The conglomerate’s diverse portfolio of businesses presents a unique set of circumstances that require careful navigation. As investors await the next earnings report, all eyes will be on Berkshire Hathaway to see how it continues to adapt and thrive in a changing economic environment.
Overall, Andrew Kligerman’s analysis sheds light on the intricacies of Berkshire Hathaway’s operations and provides valuable insights for investors looking to understand the conglomerate’s performance and prospects moving forward.
Source: https://www.cnbc.com/2024/07/22/warren-buffetts-berkshire-has-a-new-analyst-he-is-lukewarm-on-the-conglomerate.html
