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The Zacks Analyst Blog Highlights: Goldman Sachs, Morgan Stanley, Moelis & Co, Evercore and Jefferies Financial Group
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For Immediate Release
Chicago, IL – August 13, 2021 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include: The Goldman Sachs Group, Inc. (GS - Free Report) , Morgan Stanley (MS - Free Report) , Moelis & Company (MC - Free Report) , Evercore Inc. (EVR - Free Report) and Jefferies Financial Group Inc. (JEF - Free Report) .
Here are highlights from Thursday’s Analyst Blog:
5 Investment Banks Riding on Improving Global M&A Trends
Continuing with the momentum that began in the latter part of last year, 2021 is turning out to be a great year for investment banks as global merger and acquisition (M&A) activities continue at a record pace. Hence, investment banks like Goldman Sachs, Morgan Stanley, Moelis & Co, Evercore and Jefferies Financial Group are likely to post stellar profits this year.
1H21 Global M&A Insights
According to PwC’s latest report on Global M&A Industry Trends (that sourced information from Refinitiv, Dealogic and PwC analysis), the first half of 2021 witnessed record levels of deal making, with deal value and volume surging 135% and 30%, respectively, on a year-over-year basis.
The said period also recorded a large number of megadeals – those with deal value of more than $5 billion, with technology, media and telecommunications companies accounting for almost 33% of such transactions.
The very basis for such record levels of M&As seems to be the continued focus of the companies to adapt to the changing operating environment in wake of the coronavirus pandemic. As ambiguity gradually lifted following the vaccine discoveries and subsequent large-scale inoculations, companies and their management became more confident of strong economic rebound.
Other factors like ultra-low interest rates, abundance of capital, tightening regulatory scrutiny and potential capital gains tax hikes have also contributed to high level of M&A activity during the first six months of 2021.
Investment Banks Profiting From Global M&A Boom
If we check out the above-mentioned investment banks’ first-half results, M&As were one of the major contributing factors for their impressive performance.
Goldman’s total net revenues jumped 50% year over year to $33.1 billion. This Zacks Rank #3 (Hold) company’s top line was mainly driven by solid Investment Banking segment performance (debt and equity underwriting, and advisory services), which recorded top-line growth of 57% hitting $7.02 billion.
Another major global investment bank – Morgan Stanley’s – net revenues rose 30% from the first six months of 2020 to $30.5 billion. The top-line growth was primarily driven by solid investment banking activity, with the company recording 58% increase in investment banking fees to $5.4 billion.
Further, Moelis & Company’s top line surged 99% to $624.7 million during the first half of the year, while Evercore's net revenues increased 45% to $1.35 billion. Out of this, investment banking fees totaled $1.3 billion, up 37% from the prior-year period.
Jefferies' net revenues soared 75% year over year to $4.44 billion. This Zacks Rank #2 (Buy) company’s top line was largely backed by robust investment banking activity, with the company posting revenues of $2 billion from its investment banking business, an 105% jump from the first half of 2020.
Given the robust performance, investors are optimistic on these companies.
Road Ahead for Investment Banks
Outlook for the global M&As remains bullish for the second half of 2021. As the companies emerge from the pandemic-induced mayhem, drive for scale and changes toward digitization of operations are likely to result in more consolidation across several industries.
During second-quarter earnings conference call, Goldman CEO David Solomon stated that backlog of deals at the company is at record levels and said, “we observed certain secular changes driving strategic activity as our key clients emerge from the pandemic -- the drive for scale, the push to achieve operating efficiency, the shift to a digital economy across a broader industry set.”
Similarly, Moelis & Company CEO Ken Moelis commented, “the pace of our new business activity remains high, and our pipeline is stronger than it has ever been.”
Deal making is, therefore, expected to continue at a faster pace and investment banks will surely gain from such favorable trends.
Even analysts are bullish on these stocks as evident from favorable earnings estimate revision trends. The Zacks Consensus Estimate for Goldman’s earnings of $15.72 per share for the current year has moved 16.7% north over the past month and suggests 113.1% jump from the prior-year reported number.
Similarly, Morgan Stanley, which currently carries a Zacks Rank of 3, has witnessed 4.2% upward estimate revision over the past 30 days. The consensus estimate of $7.42 for this year implies 12.8% rise. The Zacks Consensus Estimate for Evercore’s earnings of $12.73 for 2021 suggests 32.3% year-over-year growth and has moved 10.2% north over the past month. It is a Zacks Rank #2 stock.
For Moelis & Company, which also has a Zacks Rank of 2, the Zacks Consensus Estimate for earnings of $4.03 for 2021 has moved 16.5% upward over the past 30 days and suggests an increase of 38.5%. Also, Jefferies’ consensus estimate of $4.76 indicates 79.6% year-over-year surge for fiscal 2021. Estimates have remained unchanged over the past month.
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.
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The Zacks Analyst Blog Highlights: Goldman Sachs, Morgan Stanley, Moelis & Co, Evercore and Jefferies Financial Group
For Immediate Release
Chicago, IL – August 13, 2021 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include: The Goldman Sachs Group, Inc. (GS - Free Report) , Morgan Stanley (MS - Free Report) , Moelis & Company (MC - Free Report) , Evercore Inc. (EVR - Free Report) and Jefferies Financial Group Inc. (JEF - Free Report) .
Here are highlights from Thursday’s Analyst Blog:
5 Investment Banks Riding on Improving Global M&A Trends
Continuing with the momentum that began in the latter part of last year, 2021 is turning out to be a great year for investment banks as global merger and acquisition (M&A) activities continue at a record pace. Hence, investment banks like Goldman Sachs, Morgan Stanley, Moelis & Co, Evercore and Jefferies Financial Group are likely to post stellar profits this year.
1H21 Global M&A Insights
According to PwC’s latest report on Global M&A Industry Trends (that sourced information from Refinitiv, Dealogic and PwC analysis), the first half of 2021 witnessed record levels of deal making, with deal value and volume surging 135% and 30%, respectively, on a year-over-year basis.
The said period also recorded a large number of megadeals – those with deal value of more than $5 billion, with technology, media and telecommunications companies accounting for almost 33% of such transactions.
The very basis for such record levels of M&As seems to be the continued focus of the companies to adapt to the changing operating environment in wake of the coronavirus pandemic. As ambiguity gradually lifted following the vaccine discoveries and subsequent large-scale inoculations, companies and their management became more confident of strong economic rebound.
Other factors like ultra-low interest rates, abundance of capital, tightening regulatory scrutiny and potential capital gains tax hikes have also contributed to high level of M&A activity during the first six months of 2021.
Investment Banks Profiting From Global M&A Boom
If we check out the above-mentioned investment banks’ first-half results, M&As were one of the major contributing factors for their impressive performance.
Goldman’s total net revenues jumped 50% year over year to $33.1 billion. This Zacks Rank #3 (Hold) company’s top line was mainly driven by solid Investment Banking segment performance (debt and equity underwriting, and advisory services), which recorded top-line growth of 57% hitting $7.02 billion.
Another major global investment bank – Morgan Stanley’s – net revenues rose 30% from the first six months of 2020 to $30.5 billion. The top-line growth was primarily driven by solid investment banking activity, with the company recording 58% increase in investment banking fees to $5.4 billion.
Further, Moelis & Company’s top line surged 99% to $624.7 million during the first half of the year, while Evercore's net revenues increased 45% to $1.35 billion. Out of this, investment banking fees totaled $1.3 billion, up 37% from the prior-year period.
Jefferies' net revenues soared 75% year over year to $4.44 billion. This Zacks Rank #2 (Buy) company’s top line was largely backed by robust investment banking activity, with the company posting revenues of $2 billion from its investment banking business, an 105% jump from the first half of 2020.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Given the robust performance, investors are optimistic on these companies.
Road Ahead for Investment Banks
Outlook for the global M&As remains bullish for the second half of 2021. As the companies emerge from the pandemic-induced mayhem, drive for scale and changes toward digitization of operations are likely to result in more consolidation across several industries.
During second-quarter earnings conference call, Goldman CEO David Solomon stated that backlog of deals at the company is at record levels and said, “we observed certain secular changes driving strategic activity as our key clients emerge from the pandemic -- the drive for scale, the push to achieve operating efficiency, the shift to a digital economy across a broader industry set.”
Similarly, Moelis & Company CEO Ken Moelis commented, “the pace of our new business activity remains high, and our pipeline is stronger than it has ever been.”
Deal making is, therefore, expected to continue at a faster pace and investment banks will surely gain from such favorable trends.
Even analysts are bullish on these stocks as evident from favorable earnings estimate revision trends. The Zacks Consensus Estimate for Goldman’s earnings of $15.72 per share for the current year has moved 16.7% north over the past month and suggests 113.1% jump from the prior-year reported number.
Similarly, Morgan Stanley, which currently carries a Zacks Rank of 3, has witnessed 4.2% upward estimate revision over the past 30 days. The consensus estimate of $7.42 for this year implies 12.8% rise. The Zacks Consensus Estimate for Evercore’s earnings of $12.73 for 2021 suggests 32.3% year-over-year growth and has moved 10.2% north over the past month. It is a Zacks Rank #2 stock.
For Moelis & Company, which also has a Zacks Rank of 2, the Zacks Consensus Estimate for earnings of $4.03 for 2021 has moved 16.5% upward over the past 30 days and suggests an increase of 38.5%. Also, Jefferies’ consensus estimate of $4.76 indicates 79.6% year-over-year surge for fiscal 2021. Estimates have remained unchanged over the past month.
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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.