After Earnings, Is Berkshire Hathaway Stock a Buy, a Sell, or Fairly Valued?

Berkshire Hathaway released its second-quarter earnings report on Aug. 2. Here’s Morningstar’s take on Berkshire Hathaway’s earnings and stock.

Key Morningstar Metrics for Berkshire Hathaway

• Fair Value Estimate Class A: $730,500.00
• Fair Value Estimate Class B: $487.00
• Morningstar Rating: ★★★
• Economic Moat: Narrow
• Morningstar Uncertainty Rating: Low

What We Thought of Berkshire Hathaway’s Q2 Earnings

Berkshire Hathaway reported adjusted second-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.

Insurance Underwriting Remains Solid: Following a period of outstanding results, the insurance operations normalized somewhat in the first half of 2025 as smaller price increases and higher catastrophe losses (primarily in the first quarter) impacted underwriting results.

Berkshire’s insurance subsidiaries have benefited from tailwinds on both sides of the business, as favorable underwriting conditions (enhanced by a more favorable pricing environment during much of the past five years) and higher short-term interest rates continue to buoy profitability across the property-casualty markets in the insurance industry.

BNSF Remains at a Crossroad: Unfortunately, BNSF continues to underperform Union Pacific UNP, despite seeing an improvement in its operating ratio in the second quarter.

BNSF’s preliminary operating income increased 10% to $2 billion, with the railroad’s operating ratio improving to 65% from 68% in the year-ago period, as well as in the first quarter of 2025. BNSF maintained its history of posting lower gains in average revenue per car/unit (including fuel surcharges) than its closest Class I railroad competitor, Union Pacific, which has generally led to higher volumes than its main peer. That was not the case in the second quarter, nor the first half of 2025, as BNSF has trailed Union Pacific by just over 300 basis points on the volume growth front.

Non-Insurance Operations: Berkshire Hathaway Energy saw an improvement in second-quarter results but signaled that future results may be impacted by recent legislation aimed at curbing renewables investments.

Normally a pillar of stability, Berkshire Hathaway Energy reported a 1% decline in second-quarter revenue on a preliminary basis. Its Berkshire Hathaway HomeServices real estate operations posted a revenue decline of 2% for the period, which was slightly worse than the 1% decline in the year-ago period and the first quarter of 2025. Revenue from the energy/utilities operations was up just over 0% year over year to $5 billion.

The manufacturing, service, and retailing division posted a weaker quarter on the top line, but profitability improved year over year.

The service division continues to post solid results, with revenue up 9% year over year during the June quarter, while the retailing segment reported a much-improved quarter, with top-line growth expanding 6%. Berkshire’s McLane distributor also posted a 1% increase in second-quarter revenue, which was an improvement on the low- to mid-single-digit top-line declines we’ve seen quarterly in the past year. Pilot Travel Centers, however, posted a 22% decline in revenue during the quarter, primarily due to significantly lower volumes from bulk fuel sales and fuel trading activities, as well as lower average fuel prices.

The bottom line: With narrow-moat Berkshire’s second-quarter operating results essentially in line with our expectations, we expect to maintain our $730,500 ($487) per Class A (B) share fair value and view the shares as slightly undervalued.

Fair Value Estimate for Berkshire Hathaway

With its 3-star rating, we believe Berkshire Hathaway stock is fairly valued compared with our long-term fair value estimate of $487 per Class B share. Our fair value estimate is derived using a sum-of-the-parts methodology, valuing each of Berkshire’s four operating segments separately and adding them together for our firmwide estimate.

In the insurance segment, our forecast assumes earned premium growth of 9.7% on average annually during 2024-28 (compared with 7.6% and 7.9% during 2020-24 and 2015-24, respectively), aided by price hardening in commercial property and casualty lines, as well as improved pricing and earned premium growth at Geico.

For the manufacturing, service, and retail operations, our forecast assumes average annual revenue growth of 3.7% during 2025-29 (which is conservative relative to historical performance). We also expect to see pre-tax operating margins of 8.3% on average annually (down from 8.6% and 8.5% on average annually during 2020-24 and 2015-24, respectively).

Read more about Berkshire Hathaway’s fair value estimate.

Economic Moat Rating

We’ve historically believed that Berkshire’s economic moat is more than a sum of its parts, although the parts that make up the whole are moaty on their own. The insurance operations remain important contributors to the overall business. Not only are they expected to account for 46% of the firm’s pre-tax earnings on average over the next five years (and 51% of our firmwide valuation), but they are also overcapitalized.

Berkshire’s track record of investing the excess cash from its operating subsidiaries in projects that have earned more than its cost of capital has gotten thinner over the years. The firm has not only been fighting with the sheer size and scale of its operations, but has also had to contend with a growing cache of private capital chasing deals that might have been attractive to it, as well as the ultimate longevity of CEO Warren Buffett.

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 free cash flow and maintains significant cash and cash equivalents on its balance sheet, amounting to $321.4 billion at the end of 2024.

Berkshire generally runs its operating companies and makes ongoing investments without an overreliance on debt. When the firm does issue debt, it does so on a long-term, fixed-rate basis. While consolidated debt levels have increased over the past decade, much of that has been tied to BHE and BNSF, whose debt is not explicitly guaranteed by Berkshire.

Read more about Berkshire Hathaway’s financial strength.

Risk and Uncertainty

Our Uncertainty Rating for Berkshire is Low. We do not consider any environmental, social, or governance issues to be material enough to affect this rating. This is due to the firm’s lower exposure to some of the main ESG risks of the industries where it competes. Berkshire has, however, tended to score lower on governance issues because of the makeup of its board and board committees, the unequal voting structure of its Class A and Class B shares, and its lack of engagement and opaqueness on governance issues.

Berkshire is exposed to foreign currency, equity price, and credit default risk through its various investments and operating companies. While derivative contracts underwritten by the company could affect the firm’s earnings and capital position, especially during more volatile markets, substantially all these contracts have expired (starting in 2019 and continuing to do so until 2025), with the exposure to losses in the future being relatively insignificant.

Read more about Berkshire Hathaway’s risk and uncertainty.

BRK.A Bulls Say

• Book value per share, which is a good proxy for measuring changes in Berkshire’s intrinsic value, 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 2024, Berkshire had $171 billion in insurance float. The cost of the firm’s float has been negative for much of the past two decades.

BRK.A 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 large enough to be meaningful.
• Another big issue is the longevity of CEO Warren Buffett, especially following the death of longtime managing partner Charlie Munger in November 2023.
• Berkshire’s insurance business faces competitive and highly cyclical markets that occasionally produce large losses, and several of its non-insurance operations are economically sensitive and focused on US markets.

This article was compiled by Isela Meraz.