Warren Buffett, the billionaire investor often revered as the “Sage of Omaha,” has received a reprieve on a deal he once described as a “big” mistake. Berkshire Hathaway, Buffett’s investment firm, recently disclosed that the value of its aerospace parts unit, Precision Castparts, has increased by nearly $2 billion, now estimated at approximately $34 billion. This marks a significant recovery for the company, which Buffett had acquired in 2016 for $37 billion, leading to a nearly $10 billion writedown just four years ago.
The turnaround of Precision Castparts is a notable one. After a difficult period during the pandemic, the aerospace industry has rebounded, benefiting companies like Precision Castparts, which supplies critical components for aircraft engines. Boeing, one of its largest clients, has also ramped up production after issues with its two flagship jets—the 737 Max and the 787 Dreamliner. This resurgence in the aerospace sector has contributed to the recovery of Precision Castparts, a development that is particularly noteworthy given Buffett’s prior concerns.
In its most recent financial report, Berkshire Hathaway’s auditor, Deloitte & Touche, cleared a key audit matter (CAM) related to Precision Castparts’ valuation, something that had loomed over the company’s financial reports for years. CAMs are used to highlight issues that require complex judgment by auditors, and Deloitte had flagged the valuation of Precision Castparts for five consecutive years, including in 2021 when the writedown was announced. However, in Berkshire’s 2024 annual report, the auditor did not raise any concerns about Precision Castparts, signaling a shift in the company’s financial outlook. This marks a significant milestone, as the fair value of the unit now exceeds its carrying value by nearly 20%, compared to just 4% in 2022.
Buffett’s initial $37 billion acquisition of Precision Castparts in 2016 was met with skepticism by some, especially when the pandemic hit in 2020, causing a dramatic slump in the aerospace industry. During that year, Precision Castparts’ sales plummeted by 29%, and its profits fell by nearly two-thirds, prompting the $10 billion writedown. Reflecting on the deal, Buffett admitted in 2021, “Precision Castparts is far from my first error of that sort. But it’s a big one,” acknowledging that he had “paid too much for the company.”
The impact of the pandemic on the aerospace sector was severe, with airlines grounding planes and halting aircraft deliveries, which led to a dramatic drop in demand for parts like those produced by Precision Castparts. In addition, Boeing faced significant production delays, particularly with the 737 Max and 787 Dreamliner, two of Precision Castparts’ largest customers. These delays exacerbated the company’s troubles as it had to deal with supply chain issues, including labor shortages, after cutting its workforce to survive the economic downturn.
However, the tides have since turned. As the aerospace industry recovers, Precision Castparts has managed to increase its revenues, surpassing its 2019 peak. In 2024, the company reported a 12% increase in revenues, reaching $10.4 billion, with pre-tax profits rising by 24% to approximately $1.9 billion. This resurgence has helped bring the unit’s value closer to what Berkshire Hathaway originally paid, giving Buffett a degree of relief from his earlier concerns.
Buffett, known for his long-term investment strategy, expressed optimism about the future of Precision Castparts. He told the Financial Times that questions regarding the company’s performance and its valuation would be best addressed at the upcoming Berkshire Hathaway annual meeting in May. While Buffett is still cautious about the company’s past challenges, he is hopeful that Precision Castparts’ recovery will continue as the aerospace industry strengthens.
Despite the recovery, Precision Castparts remains one of the largest acquisitions in Buffett’s career, second only to the purchase of the Burlington Northern Santa Fe railroad. The unit’s performance is closely watched, both by Berkshire Hathaway’s investors and by those in the aerospace sector who depend on Precision Castparts’ high-quality components.
