Brookfield Corporation (BN 0.45%) is coming off another excellent year. The leading global investment firm delivered record financial results. That helped catapult its stock, which generated a market-crushing 55% return -- more than double the S&P 500's (^GSPC 0.11%) 26% total return. That continued the company's multi-decade record of outperformance (it has generated a 19% annualized return over the last 30 years, compared to 11% for the S&P 500).
The company is in an excellent position to continue delivering robust returns for shareholders. Its businesses are growing briskly, and it trades at a wide discount compared to its intrinsic value. Because of that, it's a great stock to buy and hold.
NYSE: BN
Key Data Points
A record year
"We delivered record financial results in 2024, with strong contributions from each of our businesses," stated president Nick Goodman in Brookfield Corporation's fourth-quarter earnings press release. The company reported nearly $4.9 billion, or $3.07 per share, of distributable earnings (DE) before realizations. That implied 24% growth on an absolute basis and 15% per share compared to 2023's level. Its DE was even higher when factoring in realizations (earnings from monetizing mature assets) at almost $6.3 billion, or $3.96 per share, an increase of more than 30%.
The biggest contributor was its wealth solutions business, which produced $1.4 billion of DE, a nearly 100% increase compared to the prior year. That business has been scaling rapidly, driven by a string of acquisitions in recent years. These deals have positioned Brookfield as the top-tier writer of retail annuities in the U.S., with a growing pension business. It has also expanded its business overseas by reinsuring $1.3 billion of U.K. pension liabilities last year.
The company's asset management business, Brookfield Asset Management, also had a strong year, contributing $2.6 billion to its DE. That business generates strong and growing fee-related earnings (17% growth last year) as investors continue to pour capital into the funds it manages. Brookfield Asset Management raised $135 billion from investors last year, including $40 billion across its latest round of flagship funds (second global transition fund strategy, fifth opportunistic real estate fund strategy, and flagship opportunistic credit fund strategy.)
Meanwhile, the company's operating businesses in renewable power (Brookfield Renewable), infrastructure (Brookfield Infrastructure), private equity (Brookfield Business), and real estate delivered steady and growing cash flow. They combined to contribute $1.6 billion in DE last year. Operating funds from operations across its renewable power, transition, and infrastructure businesses were up 10% last year. Meanwhile, its core real estate portfolio (offices and malls) delivered a 4% increase in same-store net operating income last year.
Finally, Brookfield sold nearly $40 billion of mature assets across its funds and operating businesses, generating $1.4 billion in DE. Notable sales included a portfolio of U.S. manufactured housing assets and several renewable power and infrastructure assets around the world.
Growing the value
Brookfield's growing franchises have increased its intrinsic value. CEO Bruce Flatt wrote about the firm's rising value in his fourth-quarter letter to investors. He commented:
Our ability to consistently generate attractive investment returns has led to the continued growth of our intrinsic value over a long period of time. The intrinsic value of each share increased by $15 in 2024. At our best estimate, the intrinsic value now backing each one of your shares is approximately $100, which was a 19% total return in 2024. This underpins the conservative investment you own and, all else being equal, should allow you to earn a greater return than the underlying performance of our business.
This valuation estimate is important to keep in mind following the stock's surge last year. While the share price increased 55%, it currently trades at around $60. That's still a roughly 40% discount to the company's intrinsic value. That suggests the stock should continue to rise.
Meanwhile, the company expects its intrinsic value to continue growing. Its five-year plan would increase its intrinsic value above $175 per share.
Multiple catalysts drive that view. They include the continued expansion of its asset management business, the expected surge in wealth solutions' earnings (it has a clear line of sight to grow its annual DE to more than $2 billion in the near term), steady growth in its operating business (including the recovery in the real estate market), and its ability to sell mature assets and recycle that capital into higher-returning new investments.
Well-positioned to continue crushing the market
Brookfield Corporation has been a wealth-creating machine over the years. The company's platforms generate significant and growing earnings, giving it more capital to compound value for shareholders. It's in an excellent position to continue growing value for investors, given its myriad of growth drivers.
With its stock price still trading at a significant discount to its intrinsic value even after last year's surge, Brookfield remains a top stock to buy.
