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Goldman (GS) Displays Bright Prospects: Should You Hold?

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The Goldman Sachs Group, Inc. (GS - Free Report) can be a solid bet now on the back of its leading global position in completed mergers and acquisitions in 2016. The company’s strong client activity amid volatile markets is anticipated to yield positive results for the stock.

Organic growth, cost management and steady capital deployment activities continue to drive Goldman’s growth. However, strict regulations and litigation issues remain concerns.

Expense management and business diversification aided the company to surge 43.6%, compared with 33.4% growth for the Zacks categorized Investment Bank industry.



However, the company’s earnings estimates moved slightly downward, for the current year, over the last 30 days. As a result, the stock carries a Zacks Rank #3 (Hold).

For the past few years, Goldman has been benefiting from its successful expense-reduction initiatives. Though expenses witnessed a volatile trend over the past few years, the same declined significantly in 2016. Notably, the company completed an expense initiative during the first half of 2016, which translated into run rate expense savings of around $700 million. Further, the company continued those efforts in the second half of 2016 as well and generated nearly $900 million of run rate savings.

While overall revenues have been affected by unfavorable market conditions in the last few quarters, Goldman remains well positioned for growth, given its strong investment banking operations and solid client franchise. These, in turn, are likely to help the company leverage on the improving environment.

Further, the key source of the company’s earnings stability is its business diversification. Within traditional banking, a diversified product portfolio has higher chances of sustaining growth than many other banks, which have exited some of these areas.

Driven by a solid capital position, Goldman has consistently enhanced shareholders’ value with steady capital deployment activities. Its 2016 capital plan won regulatory approval that includes share buybacks and an increase in quarterly common stock dividend.

Stocks to Consider

Bank of America Corporation (BAC - Free Report) has been witnessing upward estimate revisions for the last 60 days. Further, the stock surged over 53% over the past six months. It currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Comerica Incorporated (CMA - Free Report) has been witnessing upward estimate revisions for the last 60 days. Also, the company’s shares have risen nearly 46.8% over the last six months. It currently carries a Zacks Rank #2.

Enterprise Financial Services Corp (EFSC - Free Report) has been witnessing upward estimate revisions for the last 60 days. Over the last six months, the company’s share price has been up more than 29%. It carries a Zacks Rank #2.

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