Once Called A 'Big Mistake,' Warren Buffett's Precision Castparts Acquisition Sees A $2 Billion Rebound, Narrowing Berkshire Hathaway's Losses

Warren Buffett‘s Berkshire Hathaway Inc. BRK BRK revealed that Precision Castparts, an aerospace parts manufacturer it acquired in 2016, has experienced close to a $2 billion increase in value.

What Happened: The Oracle of Omaha had previously labeled the acquisition a “big mistake,” leading Berkshire to take approximately $10 billion writedown in 2021. Buffett admitted that he “paid too much” for the company when Berkshire acquired it for $37 billion in 2016, leading to significant job cuts. The recovery has brought Precision Castparts’ value to about $34 billion, nearing the break-even point for the deal, reported the Financial Times.

The aerospace industry’s resurgence after the 2020 pandemic and increased production from Boeing BA, a key client of Precision Castparts, are credited with the recovery. Deloitte & Touche resolved a critical audit issue related to Precision Castparts, which had affected Berkshire’s financial reports for five years.

In the past, Deloitte had flagged the valuation of Precision Castparts as requiring a “high degree of auditor judgment and an increased extent of effort.” However, as its customers’ prospects improved, Berkshire’s management increased its estimate, providing more flexibility.

SEE ALSO: Elon Musk Dismisses Dogecoin Use By Government, Clears The Air On DOGE Department: ‘Two Very Different Things’

Why It Matters: Precision Castparts, has been on a growth trajectory since 2024, bouncing back from a difficult start to the decade. Despite the challenges, the company’s revenues finally surpassed their 2019 peak in 2024, rising 12% to $10.4 billion. Pre-tax profits also saw a significant rebound, increasing by 24% to approximately $1.9 billion.

The company attributes the revenue increase to higher demand for aerospace products and, to a lesser extent, power generation products. The earnings increase was mainly due to sales increases and improved manufacturing and operating efficiencies.

Precision Castparts’ future success could depend on its ability to increase production to match expected growth in air travel and demand for aerospace products, as well as improvements in industry supply chains and labor relations.

In its annual letter to Berkshire’s shareholders in February, Buffet wrote, “While our ownership in marketable equities moved downward last year from $354 billion to $272 billion, the value of our non-quoted controlled equities increased somewhat and remains far greater than the value of the marketable portfolio.”

Buffett is likely to address further questions regarding Precision Castparts at the company’s annual meeting in May.

Image via Shutterstock

Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.