KBW cites Geico tariffs and Buffett as reasons for a Berkshire 'underperformance'.

Keefe, Bruyette & Woods has downgraded Berkshire Hathaway to "underperform". The firm cited lower car insurance margins, lower interest rates, smaller tax credits for clean energy, and Warren Buffett’s departure as factors that will affect its share price.

In a report dated on Sunday, KBW analyst Meyer Shields also reduced his target price of $740,000 to $700,000.

Wall Street is rare with "Underperform' and "Sell" ratings. Berkshire closed Friday at $738.500 and dropped nearly 1% on Monday morning.

Buffett will hand over the CEO title, which he has held for the past 35 years, to Vice Chairman Greg Abel in January. However the legendary investor is still expected to remain chairman.

Since Buffett announced his management change on May 3, Berkshire Class A had trailed the Standard & Poor’s 500 index by over 28 percentage points.

Shields stated that Berkshire Geico's car insurance business would see a rise in the percentage of premiums paid to accident claims after two years of declining rates. Berkshire Geico will also boost marketing efforts to regain market share from rivals like Progressive.

He said that the BNSF's focus on western U.S. makes it vulnerable to rising tariffs and a decline in trade with Asian countries.

Shields said that falling interest rates would reduce Berkshire Hathaway's income, which was $344.1 billion at the end of June. The accelerated phase out of renewable energy credits under President Donald Trump’s One Big Beautiful Bill Act may also limit profits for Berkshire Hathaway Energy.

Buffett's exit is also a drag. It reflects his "likely unparalleled reputation" and "what we view as a sadly inadequate disclosure which will likely deter investors when they can't rely on Mr. Buffett anymore," Shields wrote.

Berkshire will report its third-quarter earnings on November 1. Reporting by Jonathan Stempel, New York; Editing Jan Harvey

(source: Reuters)