March 1, 2010 / 8:35 AM / in 8 years

UPDATE 1-RESEARCH ALERT-KBW cuts Berkshire to market perform

March 1 (Reuters) - Keefe, Bruyette and Woods downgraded Berkshire Hathaway Inc (BRKa.N) by a notch from its top rating, citing valuation, and cut its price target by 7 percent to reflect softening underwriting environment and the ongoing economic weakness.

KBW also lowered its earnings estimate on Warren Buffett’s Berkshire to $4,694 per Class A share from $4,942 for 2010, and to $5,068 per Class A share from $5,337 for 2011, citing a weak outlook for the property and casualty insurance industry.

Analysts Cliff Gallant and Brett Shirreffs downgraded Berkshire Class A shares to “market perform” from “outperform,” and cut their price target on the stock to $125,000 from $135,000.

Berkshire on Feb. 27 said its fourth-quarter profit surged, helped by derivatives bets tied to global stock markets, though operating profit fell 40 percent as the weakened economy weighed on several businesses. [ID:nN27176675]

“Going forward, we expect increasing pressure from a lengthening soft market and low fixed income yields,” KBW analysts wrote in a note to clients.

They, however, expect Berkshire to produce impressive operating earnings growth in the longer term.

Berkshire Class A shares closed Friday at $119,800 and the Class B shares (BRKb.N) at $80.13 on the New York Stock Exchange. (Reporting by Tenzin Pema in Bangalore; Editing by Aradhana Aravindan)

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