Berkshire Hathaway Shows Solid Operating Results Offsetting Unrealized Losses From Investments

Berkshire Hathaway Stock at a Glance

• Current Morningstar Fair Value Estimate: $370
• Berkshire Hathaway Stock Star Rating: 4-star
• Economic Moat Rating: Wide
• Moat Trend Rating: Stable

Berkshire Hathaway Earnings Update

Wide-moat Berkshire Hathaway BRK.B reported fourth-quarter and full-year results that were basically in line with our expectations, so we don’t expect to alter our fair value estimate of $555,000 for the A shares and $370 for the B shares. We view the shares as being moderately undervalued.

For the fourth quarter, revenue, including realized and unrealized gains and losses from Berkshire’s investment and derivative portfolios, declined 17.6% to $92.6 billion from $112.4 billion in the prior-year period on a marked decrease in gains from the investment portfolio. For the full year, revenue declined 34.0% to $234.2 billion from $354.7 billion in 2021. Excluding the impact of investment and derivative gains and losses and other adjustments, operating revenue increased 8.7% to $78.2 billion for the quarter and 9.4% to $302.1 billion for the year.

Year over year, operating earnings, excluding the impact of investment and derivative gains and losses, declined 7.9% to $6.7 billion for the quarter and increased 12.2% to $30.8 billion for the year. When including the impact of the investment and derivative gains and losses, operating earnings declined to $18.2 billion from $39.6 billion in the fourth quarter and to negative $22.8 billion from $89.8 billion for the year.

Book value per share by our estimates increased 4.2% sequentially to $323,593 from $310,652 at the end of September, below our forecast of $329,255, which included more of a contribution from the investment portfolio than was reported for the fourth quarter.

The company closed the year with $128.6 billion in cash and cash equivalents, down from $146.7 billion at the end of 2021, despite putting $34.3 billion (net of sales) in stock purchases and paying $11.5 billion to acquire Alleghany. By our calculations, the firm came into 2023 with around $94 billion in dry powder—or excess cash—that could be committed to investments, acquisitions, and share repurchases in the near term.