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Can Goldman Sachs' (GS) Stellar Performance Continue in 2021?
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Shares of Goldman Sachs (GS - Free Report) have appreciated 12.9% year to date, compared with the S&P 500 and the Zacks Investment Bank industry’s growth of 16.9% and 20.1%, respectively.
This impressive price performance is backed by the mixed economic data, and continued support from fee income on improvement in trading and investment banking performance. After intensified sell-off in March due to the pandemic, strong rebound in equity markets and rise in client activity acted as tailwinds.
Though most of the U.S. economic data were dismal, some better-than-expected interpretations in the later part of the year bolstered investor sentiment. Further, optimism surrounding the coronavirus vaccine, new coronavirus stimulus package and indications of a Brexit trade deal between the U.K. and the European Union have also been favorable.
With the Federal Reserve likely to keep interest rates near-zero next year as well, banks are anticipated to benefit from rise in demand for loans in the upcoming period. Moreover, fundamentally, solid prospects, driven by revenue growth, expense management, steady capital-deployment activities and technology advancement, are likely to fuel growth.
Factors in Detail
The key source of Goldman’s earnings stability is its business diversification. Notably, the bank has been undertaking initiatives to boost the GS Bank’s business, as evident from its acquisition of the online deposit platform of GE Capital Bank in April 2016. It also rolled out a digital consumer lending platform — Marcus by Goldman Sachs. Additionally, the company is likely to benefit from its exposure to the fast-growing exchange-traded funds (ETF) market.
In addition, Goldman’s solid global position and completed M&As are likely to provide it a competitive edge over peers. Moreover, the bank gained from its prudent expense-reduction initiatives over the past few years. Remarkably, the company completed an expense initiative and generated nearly $900 million of run-rate savings. It is focused on improving efficiency while maintaining strong franchise and investing in new opportunities. Notably, the bank expects expense efficiency savings to be $1.3 billion in three years.
Driven by a solid capital position, Goldman remains committed toward enhancing shareholders’ value on steady capital-deployment activities. Following the announcement of second round of 2020 stress test results, the company intends to resume share repurchases next quarter.
Amid the continued coronavirus crisis, Goldman holds a total debt level of $567.7 billion as of Sep 30, 2020, which has increased for the past few quarters. Further, its debt-capital ratio, currently 0.7, below the industry’s average of 0.74, has remained stable. Therefore, the company’s earnings stability and strong cash position indicate a lower credit risk and a lesser likelihood of default of interest and debt repayments if the economic situation worsens.
Apart from this, Goldman is part of the industry, which currently carries a Zacks Industry Rank #19 (top 7%).
Additionally, estimates for this Zacks Rank #2 (Buy) company has been witnessing upward revisions, of late. Over the last 30 days, the Zacks Consensus Estimate for 2021 earnings moved north.
Goldman’s earnings jumped 8.09% annually over the last three to five years. The earnings growth momentum is anticipated to continue in the near term as well. Also, the company has a trailing four-quarter earnings surprise of 32.81%, on average.
Morgan Stanley’s (MS - Free Report) next-year earnings estimate moved north in 60 days’ time. Further, the company’s shares have surged 40.9% over the past six months. At present, it carries a Zacks Rank of 2.
Evercore Inc (EVR - Free Report) has witnessed recorded upward earnings estimate revision for the ongoing year in the past 60 days. This Zacks #2 Ranked stock has appreciated 89.3% over the past six months.
Just Released: Zacks’ 7 Best Stocks for Today
Experts extracted 7 stocks from the list of 220 Zacks Rank #1 Strong Buys that has beaten the market more than 2X over with a stunning average gain of +24.4% per year.
These 7 were selected because of their superior potential for immediate breakout.
Image: Bigstock
Can Goldman Sachs' (GS) Stellar Performance Continue in 2021?
Shares of Goldman Sachs (GS - Free Report) have appreciated 12.9% year to date, compared with the S&P 500 and the Zacks Investment Bank industry’s growth of 16.9% and 20.1%, respectively.
This impressive price performance is backed by the mixed economic data, and continued support from fee income on improvement in trading and investment banking performance. After intensified sell-off in March due to the pandemic, strong rebound in equity markets and rise in client activity acted as tailwinds.
Though most of the U.S. economic data were dismal, some better-than-expected interpretations in the later part of the year bolstered investor sentiment. Further, optimism surrounding the coronavirus vaccine, new coronavirus stimulus package and indications of a Brexit trade deal between the U.K. and the European Union have also been favorable.
With the Federal Reserve likely to keep interest rates near-zero next year as well, banks are anticipated to benefit from rise in demand for loans in the upcoming period. Moreover, fundamentally, solid prospects, driven by revenue growth, expense management, steady capital-deployment activities and technology advancement, are likely to fuel growth.
Factors in Detail
The key source of Goldman’s earnings stability is its business diversification. Notably, the bank has been undertaking initiatives to boost the GS Bank’s business, as evident from its acquisition of the online deposit platform of GE Capital Bank in April 2016. It also rolled out a digital consumer lending platform — Marcus by Goldman Sachs. Additionally, the company is likely to benefit from its exposure to the fast-growing exchange-traded funds (ETF) market.
In addition, Goldman’s solid global position and completed M&As are likely to provide it a competitive edge over peers. Moreover, the bank gained from its prudent expense-reduction initiatives over the past few years. Remarkably, the company completed an expense initiative and generated nearly $900 million of run-rate savings. It is focused on improving efficiency while maintaining strong franchise and investing in new opportunities. Notably, the bank expects expense efficiency savings to be $1.3 billion in three years.
Driven by a solid capital position, Goldman remains committed toward enhancing shareholders’ value on steady capital-deployment activities. Following the announcement of second round of 2020 stress test results, the company intends to resume share repurchases next quarter.
Amid the continued coronavirus crisis, Goldman holds a total debt level of $567.7 billion as of Sep 30, 2020, which has increased for the past few quarters. Further, its debt-capital ratio, currently 0.7, below the industry’s average of 0.74, has remained stable. Therefore, the company’s earnings stability and strong cash position indicate a lower credit risk and a lesser likelihood of default of interest and debt repayments if the economic situation worsens.
Apart from this, Goldman is part of the industry, which currently carries a Zacks Industry Rank #19 (top 7%).
Additionally, estimates for this Zacks Rank #2 (Buy) company has been witnessing upward revisions, of late. Over the last 30 days, the Zacks Consensus Estimate for 2021 earnings moved north.
Goldman’s earnings jumped 8.09% annually over the last three to five years. The earnings growth momentum is anticipated to continue in the near term as well. Also, the company has a trailing four-quarter earnings surprise of 32.81%, on average.
Other Stocks to Consider
JMP Group LLC has witnessed upward earnings estimate revisions for 2021 over the past 60 days. Moreover, this Zacks #2 Ranked stock has gained 32.7% over the past six months. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Morgan Stanley’s (MS - Free Report) next-year earnings estimate moved north in 60 days’ time. Further, the company’s shares have surged 40.9% over the past six months. At present, it carries a Zacks Rank of 2.
Evercore Inc (EVR - Free Report) has witnessed recorded upward earnings estimate revision for the ongoing year in the past 60 days. This Zacks #2 Ranked stock has appreciated 89.3% over the past six months.
Just Released: Zacks’ 7 Best Stocks for Today
Experts extracted 7 stocks from the list of 220 Zacks Rank #1 Strong Buys that has beaten the market more than 2X over with a stunning average gain of +24.4% per year.
These 7 were selected because of their superior potential for immediate breakout.
See these time-sensitive tickers now >>