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Why Is Goldman (GS) Up 7.2% Since Last Earnings Report?
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A month has gone by since the last earnings report for Goldman Sachs (GS - Free Report) . Shares have added about 7.2% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Goldman due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Goldman Q4 Earnings Lag Estimates as IB Revenues Crash
The Goldman Sachs Group reported fourth-quarter 2022 earnings per share of $3.32 that missed the Zacks Consensus Estimate of $5.25 by a considerable margin. Also, the bottom line fell significantly from $10.81 in the year-earlier quarter. Our estimate for earnings was $4.80 per share.
Goldman’s results were adversely impacted by a slump in the investment banking (IB) business and a decline in asset management revenues. Further, higher provisions were an undermining factor. Yet, the strength in the Fixed Income, Currency and Commodities Client Execution (FICC) and consumer banking businesses acted as tailwinds.
Net earnings of $1.32 billion plunged 66% from the prior-year quarter.
In 2022, earnings of $30.06 per share lagged the consensus estimate of $31.98 and tanked 49% year over year. Our estimate for earnings was $31.54 per share. Net earnings were $11.26 billion, down 48% from the prior year.
Revenues Decline, Expenses Rise
Net revenues of $10.59 billion fell 16% from the year-ago quarter. Nonetheless, the top line beat the Zacks Consensus Estimate of $10.52 billion. Our estimate for the metric was $10.29 billion.
In 2022, net revenues came in at $47.37 billion, which outpaced the Zacks Consensus Estimate of $47.29 billion. However, the top line declined 20% year over year. Our estimate for total revenues was $47.07 billion.
Total operating expenses increased 11% year over year to $8.09 billion.
Provision for credit losses was $972 million, higher than $344 million in the prior-year quarter.
Quarterly Segment Performance Mixed
Effective fourth-quarter 2022, Goldman realigned its businesses to further capitalize on its operating model. It has put its businesses into three operating segments — Asset & Wealth Management, Global Banking & Markets, and Platform Solutions.
The Asset & Wealth Management division generated revenues of $3.56 billion in the reported quarter, down 27% year over year. Results reflect a significant decline in net revenues in Equity investments and Debt investments.
Firmwide assets under supervision were $2.55 trillion, up 5% sequentially.
The Global Banking & Markets division recorded revenues of $6.52 billion, down 14% year over year. The fall indicated weakness in IB business (down 48%) and lower equities revenues (down 5%), partially offset by impressive net revenues in FICC (up 44%).
The Platform Solutions division’s revenues were $513 million, substantially higher year over year. The jump was driven by significantly higher credit card balances and an increase in total deposits.
Capital Ratios Improve
As of Dec 31, 2022, the standardized Common Equity Tier 1 capital ratio was 15.1%, up from the prior-year quarter’s 14.2%. The company’s supplementary leverage ratio was 5.8%, up from 5.6% in the prior-year quarter. Capital Deployment Update
In the quarter under review, Goldman returned $2.38 billion of capital to common shareholders. This included $1.5 billion in share repurchases and common stock dividends of $880 million.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended downward during the past month.
The consensus estimate has shifted -15% due to these changes.
VGM Scores
Currently, Goldman has a poor Growth Score of F, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Goldman has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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Why Is Goldman (GS) Up 7.2% Since Last Earnings Report?
A month has gone by since the last earnings report for Goldman Sachs (GS - Free Report) . Shares have added about 7.2% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Goldman due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Goldman Q4 Earnings Lag Estimates as IB Revenues Crash
The Goldman Sachs Group reported fourth-quarter 2022 earnings per share of $3.32 that missed the Zacks Consensus Estimate of $5.25 by a considerable margin. Also, the bottom line fell significantly from $10.81 in the year-earlier quarter. Our estimate for earnings was $4.80 per share.
Goldman’s results were adversely impacted by a slump in the investment banking (IB) business and a decline in asset management revenues. Further, higher provisions were an undermining factor. Yet, the strength in the Fixed Income, Currency and Commodities Client Execution (FICC) and consumer banking businesses acted as tailwinds.
Net earnings of $1.32 billion plunged 66% from the prior-year quarter.
In 2022, earnings of $30.06 per share lagged the consensus estimate of $31.98 and tanked 49% year over year. Our estimate for earnings was $31.54 per share. Net earnings were $11.26 billion, down 48% from the prior year.
Revenues Decline, Expenses Rise
Net revenues of $10.59 billion fell 16% from the year-ago quarter. Nonetheless, the top line beat the Zacks Consensus Estimate of $10.52 billion. Our estimate for the metric was $10.29 billion.
In 2022, net revenues came in at $47.37 billion, which outpaced the Zacks Consensus Estimate of $47.29 billion. However, the top line declined 20% year over year. Our estimate for total revenues was $47.07 billion.
Total operating expenses increased 11% year over year to $8.09 billion.
Provision for credit losses was $972 million, higher than $344 million in the prior-year quarter.
Quarterly Segment Performance Mixed
Effective fourth-quarter 2022, Goldman realigned its businesses to further capitalize on its operating model. It has put its businesses into three operating segments — Asset & Wealth Management, Global Banking & Markets, and Platform Solutions.
The Asset & Wealth Management division generated revenues of $3.56 billion in the reported quarter, down 27% year over year. Results reflect a significant decline in net revenues in Equity investments and Debt investments.
Firmwide assets under supervision were $2.55 trillion, up 5% sequentially.
The Global Banking & Markets division recorded revenues of $6.52 billion, down 14% year over year. The fall indicated weakness in IB business (down 48%) and lower equities revenues (down 5%), partially offset by impressive net revenues in FICC (up 44%).
The Platform Solutions division’s revenues were $513 million, substantially higher year over year. The jump was driven by significantly higher credit card balances and an increase in total deposits.
Capital Ratios Improve
As of Dec 31, 2022, the standardized Common Equity Tier 1 capital ratio was 15.1%, up from the prior-year quarter’s 14.2%. The company’s supplementary leverage ratio was 5.8%, up from 5.6% in the prior-year quarter.
Capital Deployment Update
In the quarter under review, Goldman returned $2.38 billion of capital to common shareholders. This included $1.5 billion in share repurchases and common stock dividends of $880 million.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended downward during the past month.
The consensus estimate has shifted -15% due to these changes.
VGM Scores
Currently, Goldman has a poor Growth Score of F, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Goldman has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.