Maintaining Outperform: The Buyback Resumes for the First Time Since 2024, Cash Still Hits a Record $397B After OxyChem, and Abel's First Annual Meeting Stresses Continuity
Key Takeaways
- The buyback is back — the catalyst we flagged at the upgrade has arrived. Berkshire repurchased ~$235M of stock (33 Class A and 431,462 Class B shares), its first buyback since May 2024, after the stock's P/B slipped toward ~1.4x. The dollar amount is small; the signal is large. It confirms that the framework Abel reopened in his first letter is live, and that management treats the current price as below intrinsic value.
- Cash hit a record $397.4B — even after deploying $9.7B on OxyChem and selling $8B net of equities. The cash machine refilled the pile faster than two outlets could drain it, which is both the bull case (extraordinary cash generation) and the standing question (the pile keeps growing). OxyChem, closed January 2, now sits inside the manufacturing segment.
- Operating earnings rose 18% to $11.35B but it's a low-quality beat that missed the Street. Roughly $962M of the gain is a non-cash FX swing, helped further by an easy no-catastrophe comp and ~$499M of favorable reserve releases. Underneath, GEICO underwriting fell (loss ratio +4.9 points to 73.9% on higher claims frequency/severity) and insurance investment income dropped 7.4% as rates eased. The print came in ~$0.2B below the ~$11.56B consensus.
- Abel cleared the bar in his first meeting. He ran the Q&A from the stage while Buffett (95, now Chairman) attended without taking questions; he ruled out any break-up, framed the cash as flexibility rather than a problem, and disclosed he put all $15.3M of his 2026 pay into Berkshire stock — a personal-alignment signal that rhymes with the resumed corporate buyback.
- Rating: Maintaining Outperform. The upgrade thesis is playing out: the buyback resumed, capital is deploying (OxyChem), and the stock remains the cheapest of our window at ~1.39x book, down 12.4% over twelve months while the index keeps climbing. The soft-quality operating beat is a footnote to a capital-allocation story that is finally turning the right way — and the defensiveness is increasingly valuable as the market's momentum narrows.
Results vs. Expectations
This is the rare Berkshire quarter that carried a syndicated Street estimate, given the attention on Greg Abel's first report — and operating earnings of $11.35B came in modestly below the ~$11.56B consensus even as they rose 18% year-over-year. Both facts are true and both are second-order. The quarter that matters is the capital-allocation quarter, and on that score it delivered.
| Metric (after-tax) | Q1 2026 | Q1 2025 | Y/Y | Read |
|---|---|---|---|---|
| Operating earnings | $11,346M | $9,641M | +17.7% | Up, but FX-flattered; missed Street |
| Operating EPS (Class B) | ~$5.26 | ~$4.47 | +17.7% | vs ~$5.36 consensus |
| GAAP net earnings | $10,106M | $4,603M | +120% | Smaller equity-mark loss |
| Investment losses (after-tax) | −$1,240M | −$5,038M | — | Non-operating |
| Cash + T-bills | $397.4B | ~$348B | Record | +$24B Q/Q after OxyChem |
| Insurance float | $176.9B | ~$174B | +~2% | Record, low-cost |
| Book value (equity) | $727.2B | — | — | ~1.39x P/B |
Operating earnings by segment (after-tax)
| Segment | Q1 2026 | Q1 2025 | Y/Y | Notable |
|---|---|---|---|---|
| Insurance — underwriting | $1,717M | $1,336M | +28.5% | Easy comp — Q1'25 had ~$1.1B wildfires |
| Insurance — investment income | $2,679M | $2,893M | −7.4% | Lower rates; T-bill reinvestment |
| Railroad (BNSF) | $1,377M | $1,214M | +13.4% | Volume +2.2%, rev/car +2.8% |
| Utilities & energy (BHE) | $1,114M | $1,097M | +1.6% | Capex $2.4B, the heaviest segment |
| Manufacturing, service & retailing | $3,199M | $3,060M | +4.5% | OxyChem joining the roster |
| Other (incl. FX on non-USD debt) | $1,260M | $41M | +$1,219M | ~$962M of it is the FX swing |
| Operating earnings | $11,346M | $9,641M | +17.7% | Beat is low-quality |
Segment Performance
Insurance — Underwriting & GEICO
Underwriting profit rose 28.5% to $1,717M after-tax, but the gain is almost entirely the absence of catastrophes (Q1 2025's ~$1.1B Southern California wildfires did not repeat) plus ~$499M of favorable prior-year reserve releases. The underlying signal is less flattering: GEICO's pre-tax underwriting profit fell sharply to $1,416M from $2,173M, with the loss ratio deteriorating 4.9 points to 73.9% on higher claims frequency and severity, even as premiums earned grew 4.0% to $11,186M.
Assessment: Read past the comp and this is the first GEICO underwriting result in a while that warrants genuine attention. A near-5-point loss-ratio deterioration is meaningful — frequency and severity are running hotter, and the rate actions of prior years may be fully earned in. It is one quarter and the combined ratio is still healthy, so we are not sounding an alarm, but GEICO's margin trajectory moves to the top of our watch list. The headline underwriting "growth" is cat-comp noise; the GEICO loss ratio is the real datum.
Insurance — Investment Income
Investment income fell 7.4% to $2,679M as the front end of the curve drifted lower and the T-bill book reinvested at reduced yields — the third consecutive quarter this line has been a headwind.
Assessment: The pattern is now established: in a falling-rate world, the enormous cash pile is a shrinking earnings contributor. This is the clearest financial argument for the capital deployment that is finally underway — every dollar moved from T-bills into OxyChem-type operating assets or repurchased stock is a dollar working harder than it was at a declining 4% yield.
Railroad — BNSF
BNSF was the quarter's cleanest operating story: pre-tax earnings up 13.5% on revenue of $5,994M (+4.8%), with volumes up 2.2% and average revenue per car/unit up 2.8%. The volume-plus-price-plus-margin combination is exactly the algorithm management has been working toward.
Assessment: A fourth consecutive quarter of healthy BNSF results, and this time on real volume growth rather than just fuel-cost tailwinds. Abel singled out the railroad's margin opportunity in his letter and again at the meeting; the numbers say the program is working. BNSF is the segment most clearly re-rating from flat-line cyclical toward structural grower, and it is doing so under heightened management focus.
Utilities & Energy — BHE
BHE earnings edged up 1.6% to $1,114M on revenue of $6,661M, while carrying the heaviest capital-expenditure load of any segment at $2,418M. The wildfire litigation and the renewable-tax-credit phase-out remain the swing factors for the segment's medium-term earnings.
Assessment: Modest growth against the largest capex bill in the company — BHE is in an investment-heavy phase, and its near-term earnings will reflect that drag. The longer-term questions (PacifiCorp wildfire exposure, the economics of renewable build-out after the credit phase-out) are unchanged from last quarter. We continue to treat BHE as the segment with the widest outcome range and discount it accordingly.
Manufacturing, Service & Retailing
The industrial and consumer collection earned $3,199M, up 4.5% — and is about to grow, as OxyChem (closed January 2) folds in as a new, cash-generative chemicals operation.
Assessment: Steady as ever, with a fresh leg. OxyChem is the kind of unglamorous, cash-throwing industrial business that fits this segment perfectly and adds scale without drama. It is also the tangible proof that the $397B can be put to work in size when the price is right.
Other — The FX Swing, Again
"Other" jumped to $1,260M from $41M, with roughly $962M of the move attributable to FX: a $249M after-tax remeasurement gain on non-USD debt this year against a $713M loss last year, as a weaker dollar reversed the prior-year headwind. The line also carries ~$967M of interest and dividend income on Treasury bills and investments not held inside an insurance subsidiary.
Assessment: The same non-cash wildcard, now working in Berkshire's favor — and accounting for the lion's share of the year-over-year operating-earnings increase. We look through it, as always. That a single FX line can manufacture ~$1B of "growth" is the recurring reminder of why the segment table, not the operating-earnings total, carries the signal.
Capital Allocation — The Thesis Is Turning
The upgrade last quarter rested on a bet that capital would begin to move and that the de-rated valuation would re-engage the buyback. This quarter delivered both:
- Buybacks: resumed. ~$235M repurchased — 33 Class A and 431,462 Class B shares — the first repurchase since May 2024, after the stock's P/B slid toward ~1.4x. Modest in size, decisive in meaning: the framework Abel reopened in February is now operating.
- Acquisitions: deployed. OxyChem's $9.7B closed January 2 and shows up as a $9.69B cash outflow this quarter — real capital, real assets, now consolidated.
- Equities: still a net seller (~$8.1B), trimming financials in particular (the five-name concentration eased to ~61% from 65%). No splashy new position was disclosed in the quarter — the visible Q1 actions were the buyback and the deal.
- Cash: a record $397.4B, up ~$24B in the quarter despite OxyChem — the engine generates faster than the outlets drain.
Assessment: This is the validation. Two quarters ago we were waiting for any sign capital would move; one quarter ago Abel signaled it in words; this quarter it happened in deeds — a closed acquisition and a resumed buyback. The pile still grew, which keeps the long-run deployment question open, but the trajectory has unmistakably reversed. With investment income falling, the incentive to keep deploying is structural, not discretionary. We read the resumed buyback plus Abel's personal $15.3M stock purchase as a clear statement that management views the stock as cheap here — and we agree.
The Annual Meeting — Abel's First as CEO
Berkshire's annual meeting is the closest the company comes to a Q&A, and the 2026 edition was the first run by Greg Abel as CEO, with Warren Buffett (95) attending but not fielding questions. Abel handled the sessions alongside Ajit Jain on insurance and the operating heads on the businesses. The crowd was thinner and the tone more businesslike than the Buffett-era spectacle — and on the substance, investors broadly endorsed his command of the operations. The management commentary that bears on the thesis:
"Berkshire is a conglomerate, and we recognize that. But we are a unique conglomerate in that we can move our capital very efficiently. We can move it from insurance to non-insurance, into equities, or if we so choose, to hold it in cash."
— Greg Abel, CEO, 2026 Annual Shareholder Meeting
On the record cash and the pressure to deploy it, Abel was pointed about patience:
"It doesn't mean you need to deploy all your capital and spend all your money."
— Greg Abel, CEO
And on the recurring break-up speculation that tends to attach to any conglomerate at a sum-of-the-parts discount, he was unequivocal — ruling out a break-up and framing the Buffett-Munger inheritance as permanent:
"Both those jerseys will remain in the rafters for the years to come."
— Greg Abel, CEO, on the Buffett and Munger legacy
Assessment: A reassuring first outing. Abel's message was continuity, not reinvention: the decentralized model stays, the hold-forever ethos stays, the cash is flexibility rather than a problem to be solved on a deadline. For a shareholder whose chief post-Buffett worry was strategic discontinuity, that is the right message — and his decision to put all of his 2026 pay into the stock backs the words with personal capital. The meeting did not reveal a signature Abel offensive move, which is the one thing the bulls are still waiting for; the visible posture this quarter was defensive (net selling, a small buyback). But "patient, disciplined, aligned, and willing to repurchase below intrinsic value" is exactly the operating system the Outperform case is underwritten on.
Book Value & Valuation
Book value rose to $727.2B. At the post-print close of $468.52, the market capitalization of roughly $1.01T puts the stock at approximately 1.39x book — the cheapest level in our four-quarter coverage window and at the very bottom of its decade-long range. The equity portfolio eased to $288.0B (from $297.8B) as financials were trimmed and the book was marked.
The relative-performance picture is what underwrites the rating. BRK-B entered the print down 5.9% year-to-date while the S&P 500 was up 5.6%, and is down 12.4% over the trailing twelve months — a stock that has now lagged the index for the better part of a year and sits well below its $539.80 all-time high (set the day before the May 2025 succession announcement, a level it has not revisited).
Assessment: The de-rating that drove our upgrade has, if anything, deepened — and it is exactly that discount that triggered the company's own buyback. A fortress balance sheet, a record and growing float, a re-engaging capital-allocation cycle, and defensive earnings, all at ~1.39x book and trailing the index by double digits, is the asymmetry we want to own. The lower the multiple goes, the more the company itself becomes a buyer alongside us — a self-reinforcing floor that a fairly-valued stock does not enjoy.
Market Reaction
- Pre-print setup: BRK-B closed at $473.01 on Friday, May 1, down 5.9% year-to-date against the S&P 500's +5.6%, and down 12.4% over the trailing twelve months — a persistent laggard entering the report.
- Reaction session (Monday, May 4): Shares opened flat, traded a $465.79–$479.87 band, and closed at $468.52, down 0.9% on the day (−$4.49), on volume of 6.9M versus a 4.6M 30-day average (1.5x). The S&P 500 slipped 0.4% the same session.
A muted reaction to a quarter the market read the way we did — a soft-quality operating beat against a reassuring first meeting and a resumed buyback. With the stock already de-rated and the print holding no surprises in either direction, there was little to move it. The more important market fact is the one in the setup: a fortress compounder trading down 12% over a year while the index grinds higher, with the company now buying its own shares into that weakness. That is the backdrop our Outperform is built on.
Street Perspective
Debate: Does a $235M buyback actually matter?
Bull view: The size is irrelevant; the signal is everything. After 21 months of zero repurchases, management chose to buy at ~1.4x book — a clear statement that the insiders see value here, and the re-establishment of a tool that can scale rapidly if the stock stays cheap.
Bear view: $235M against a $397B cash pile and a $1T market cap is a rounding error — a token gesture to quiet the capital-allocation critics, not a real change in posture. Wake us when it's $5B a quarter.
Our take: Decisively with the bull on the signal. Berkshire's buyback has always been a valuation thermostat, not a payout program — it switches on when the stock is cheap and off when it isn't. Switching it on, plus Abel's personal purchase, tells you where management thinks intrinsic value sits relative to the price. The size will follow the discount.
Debate: Is the soft GEICO underwriting quarter a warning?
Bull view: One quarter of elevated frequency/severity against a still-healthy combined ratio, in a business with the industry's best cost structure and pricing power to re-rate. GEICO has navigated loss-cost spikes before and come out ahead.
Bear view: A 4.9-point loss-ratio jump is not noise — it may signal that the post-2022 margin recovery has peaked and that loss-cost inflation is reasserting, with rate adequacy lagging again.
Our take: A legitimate watch item and the one genuine blemish in the quarter. We lean bull — GEICO's pricing machinery is the best in the business and one quarter doesn't make a trend — but we are watching the loss ratio closely into the next two prints. It is a reason for vigilance, not a reason to alter the rating.
Debate: Is Berkshire the right defensive holding for a narrowing market?
Bull view: A fortress balance sheet, $397B of dry powder, negative-cost float, and durable cash-generative businesses, trading at the low end of its valuation range and 12 points behind the index — this is the textbook hedge against a momentum market that has narrowed to a handful of AI names.
Bear view: In a market that keeps rewarding growth and AI exposure, a cash-heavy industrial holding company with a new CEO and a softening insurance line can keep lagging indefinitely — cheap is not a catalyst.
Our take: With the index's leadership narrowing and Berkshire now repurchasing its own shares into the discount, we think the asymmetry favors the stock over a 12-month horizon. The catalyst the bear says is missing is, in fact, present: the company itself is the marginal buyer, and the cash gives it the means to act into any dislocation. We stay Outperform.
Thesis Scorecard
| Thesis Point | Status | Notes |
|---|---|---|
| Bull: Capital allocation re-engaging (the upgrade catalyst) | Confirmed | Buyback resumed ($235M, first since May 2024); OxyChem deployed |
| Bull: De-rated valuation creates margin of safety | Confirmed | ~1.39x book, −12.4% TTM — cheapest of the window; company now buying |
| Bull: Continuity preserved under Abel | Confirmed | First meeting reassured; no break-up; personal $15.3M stock purchase |
| Bear: Operating beat is low-quality (FX/comp) | Confirmed | ~$962M FX + easy cat comp + reserve releases flatter the +18% |
| Bear: GEICO loss ratio deteriorating | New watch item | Loss ratio +4.9 pts to 73.9%; monitor next two prints |
Overall: Thesis confirmed and strengthening on the capital-allocation axis. The upgrade catalyst (buyback) materialized, deployment is underway, and the valuation discount persists — partially offset by a low-quality operating beat and a new GEICO watch item. Net: the Outperform case is intact and better-supported than at the upgrade.
Action: Maintaining Outperform. The capital-allocation turn we underwrote is happening; the stock is cheap and the company is buying it; the defensiveness is increasingly valuable. We watch the GEICO loss ratio and the cadence of buybacks/deployment as the keys to the next move.