Goldman Sachs Group, Inc. (NYSE:GS) will release its quarterly report next Tuesday, and the investment bank has done an impressive job over the past year of bolstering its business fundamentals and boosting its share price. But even with an expected rise this quarter, will Goldman Sachs’ earnings continue to grow fast enough to justify its current stock price?
Goldman Sachs Group, Inc. (NYSE:GS) drew plenty of criticism during the financial crisis because of the role it played in facilitating some of the sophisticated transactions that eventually brought the global financial system to the brink of collapse. As regulators have clamped down on the banking industry, Goldman has continued to look for ways to earn profits from its wide variety of different businesses. Let’s take an early look at what’s been happening with Goldman Sachs over the past quarter and what we’re likely to see in its quarterly report.
Stats on Goldman Sachs
|Analyst EPS Estimate||$2.82|
|Change From Year-Ago EPS||58%|
|Revenue Estimate||$7.98 billion|
|Change From Year-Ago Revenue||20.5%|
|Earnings Beats in Past 4 Quarters||4|
Will this quarter be the last big jump for Goldman Sachs earnings?
In recent months, analysts have had mixed views on the earnings prospects for Goldman Sachs Group, Inc. (NYSE:GS), cutting nearly a dime per share from their June quarter estimates, but boosting their full-year consensus by $0.37 per share. The stock has continued its upward trajectory, rising 8% since early April.
Much of Goldman’s earnings rebound has come from a combination of a strong environment for bond issuance and smart internal moves within the investment bank. In its first quarter, Goldman Sachs Group, Inc. (NYSE:GS) used tactics like cutting its compensation-to-revenue ratio to help it boost its return on equity. Meanwhile, even though its trading revenues fell, rising corporate debt activity provided an offset, helping the bank grow its total revenue by 9%.
Goldman Sachs Group, Inc. (NYSE:GS) has also made a number of high-profile investments recently, not all of which have panned out. In May, the company said it would invest in a $500 million fund to help SolarCity Corp (NASDAQ:SCTY) provide financing for its residential solar-installation customers, seeking to cash in on the trend toward smaller solar projects. Yet Goldman’s bid to take insurance-software company Ebix Inc (NASDAQ:EBIX) private didn’t turn out as well, as the launch of an investigation by federal prosecutors last month led the investment bank to walk away from its proposed $820 million purchase offer.