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Wall Street lifts its price targets for Berkshire Hathaway

Julia La Roche
Reporter

Berkshire Hathaway ( BRK-A , BRK-B ), the insurance and investment behemoth led by legendary billionaire Warren Buffett, is getting a price target boosts from Wall Street following its stronger-than-expected third-quarter earnings report.

On Monday, Barclays raised its 2018/2019 operating earnings outlook to $15,186/$15,425 for A shares, up from $14,494/$14,766, and its forecast for B shares to $10.12/$10.35, up from $9.66/$9.85. Barclays also raised its price target for Berkshire’s stock by 5% to $397,500 per A share and $265 per B share.

“Berkshire looks well-positioned to benefit from an expanding economy, higher short-term interest rates, and potential future accretive acquisitions. In 2019, we project annual book value growth of 10% and comprehensive return on tangible equity of 12%,” Barclays analyst Jay Gelb wrote.

Elsewhere, UBS raised its price target for B-shares to $258 from $251.

Berkshire A shares were last trading around up 5% at around $324,105.97 on Monday, while the B shares were recently trading up 4.5% at about $215.93.

Warren Buffett, chairman and CEO of Berkshire Hathaway  (AP Photo/Nati Harnik)

Over the weekend, Berkshire reported strong third-quarter earnings . During the quarter, operating earnings came in at $6.88 billion, up from $3.44 billion a year ago. Some of the big drivers in the quarter included insurance underwriting, posting $441 million in operating earnings after losing $1.44 billion last year. Railroad, utilities, and energy delivered operating earnings of $2.48 billion versus $1.99 billion a year ago.

Buybacks

In addition to reporting earnings, Berkshire also disclosed nearly a billion worth of share repurchases during the quarter.

In a rare move for Buffett, Berkshire repurchased $928 million worth of stock. Buffett, who is 88 and has run Berkshire for over 50 years, has only done buybacks twice before — once in 2011 for $67 million and again in late 2012 for $1.3 billion to buy 9,475 A shares and 606,499 B shares from the estate of an unnamed shareholder.

In July, Berkshire’s board amended its buyback policy from only if shares were 120% below book value to “any time that Warren Buffett and Charlie Munger believe that the repurchase price is below Berkshire’s intrinsic value, conservatively determined.”

With a cash pile of more than $100 billion, UBS expects Berkshire will make more share repurchases.

“The average purchase price reflected a price-to-2Q18 [book value per share] multiple of just over 1.4x. Given the significant cash balance BRK continues to hold ($104 billion at 9/30/18) and a valuation that is below where it repurchased shares in 3Q18, we believe the company will likely continue to repurchase its shares in 4Q18,” UBS analyst Brian Meredith wrote in a note.

Julia La Roche is a finance reporter at Yahoo Finance. Follow her on Twitter .