Berkshire Hathaway's 12% Rally: Is the Momentum Sustainable?

Investors have flocked to Berkshire Hathaway (BRK.B) this year, sending shares up 12% as of early 2025. But with the company’s Q1 earnings report looming and mixed signals emerging, the question remains: Is Berkshire still a compelling buy? Let’s dissect the data.

Earnings and Revenue: A Mixed Picture

The upcoming Q1 2025 earnings report, scheduled for May 5, 2025 (though not yet confirmed), will be critical. Analysts project a diluted EPS of $4.70, slightly below the $5.19 reported in Q1 2024. Revenue, however, faces tougher headwinds: estimates point to a -9.15% year-over-year decline to $81.59 billion. This contrasts sharply with the S&P 500’s projected 6.94% revenue growth, raising concerns about Berkshire’s ability to keep pace with broader market trends.

Analyst Sentiment: Bullish, but Cautious

Wall Street analysts remain largely bullish, with 3 Buy ratings and 1 Hold yielding a “Moderate Buy” consensus. UBS has maintained a Buy rating consistently, citing Berkshire’s diversified portfolio and Warren Buffett’s track record. However, the average price target of $525 as of April 2024 lags behind the stock’s current price of $530.96, suggesting analysts may be tempering expectations.

Valuation: A Premium for Long-Term Growth?

Berkshire’s valuation metrics tell a nuanced story. Its trailing P/E ratio of 12.06 appears reasonable, but the forward P/E of 21.84 hints at elevated expectations for future earnings growth. This premium may reflect optimism around Buffett’s investments in sectors like energy and insurance, though it also raises the stakes for delivering consistent results.

Risks to Consider

1. Revenue Declines: The projected Q1 revenue drop underscores challenges in key areas like insurance and manufacturing.
2. Earnings Volatility: While Berkshire beat estimates by +60.69% in Q4 2024, Q1’s softer EPS forecast could disappoint.
3. Market Competition: With the S&P 500 growing faster, Berkshire’s slower revenue trajectory may test its valuation.

The Long-Term Case for Berkshire

Despite near-term headwinds, Berkshire’s fundamentals remain robust. Its $150 billion cash hoard offers flexibility, and Buffett’s disciplined approach to capital allocation has historically insulated the firm during downturns. Additionally, the stock’s +9.8% gain over 74 days following its last earnings report in May 2024 suggests investors reward stability.

Conclusion: A Buy, but with Caveats

Berkshire Hathaway (BRK.B) remains a Hold-to-Buy for long-term investors. While near-term risks like revenue declines and valuation pressures exist, the company’s diversified portfolio, strong balance sheet, and legendary leadership justify optimism. Key catalysts include:
- Q1 Earnings (May 5, 2025): A beat on EPS could lift shares toward the $606 price target from bullish analysts.
- Strategic Investments: Buffett’s moves in energy, railroads, and tech could drive growth over the next decade.

However, investors must weigh Berkshire’s 21.84 forward P/E against its slower revenue growth. For those with a multi-year horizon, the stock’s 12.06 trailing P/E and consistent dividend record make it a compelling core holding. For traders, the May earnings report will be a litmus test—missed estimates could expose valuation risks.

In short: Berkshire is still a buy, but its success hinges on execution in 2025 and beyond. Stay tuned to May’s earnings call for clarity.