It has been about a month since the last earnings report for Goldman Sachs (GS Quick QuoteGS - Free Report) . Shares have added about 3.7% 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 its most recent earnings report in order to get a better handle on the important drivers.

Goldman Q4 Earnings Miss Estimates, Revenues Improves

Goldman’s fourth-quarter 2021 earnings per share of $10.81 have lagged the Zacks Consensus Estimate of $12.10. Further, the bottom line fell 10.5% from the year-earlier quarter.

While strength in the debt underwriting, wealth management and consumer banking businesses acted as a tailwind, the bank’s results were hurt by lower FICC revenues.

Impressive financial advisory revenues, owing to the rise in industry-wide completed mergers and acquisition transactions, acted as tailwinds.

Net earnings of $3.94 billion decreased 13% from the prior-year quarter.

For 2021, the company posted record earnings per share of $59.45, higher than the year-ago period’s $12.08. However, earnings lagged the Zacks Consensus Estimate of $60.70. Results included the impacts of $9.51 related to net provisions for litigation and regulatory proceedings during the year.

Revenues Jump, Expenses Rise

Fourth-quarter Net revenues of $12.64 billion rose 8% from the year-ago quarter. The top line beat the Zacks Consensus Estimate of $12.09 billion.

For 2021, the company reported record revenues of $59.34 billion, up 33% year over year. Further, revenues beat the Zacks Consensus Estimate of $58.72 billion.

Total operating expenses flared up 23% year over year to $7.27 billion.

Provision for credit losses was $344 million, lower than $293 million in the prior-year quarter.

Mixed Segmental Performance

The IB division generated revenues of $3.79 billion in the reported quarter, up 45% year over year. Results reflect higher net revenues in financial advisory, supported by a significant increase in completed mergers and acquisition volumes. Corporate lending revenues of $192 million significantly increased from the prior-year quarter. Tough comps from the prior-year quarter resulted in a decline in equity underwriting revenues.

The Global Markets division recorded revenues of $3.99 billion, down 7% year over year. The downtick indicated a decline in net revenues in FICC due to lower intermediation net revenues. Also, a decline in equities revenues (11%) was recorded due to lower equities intermediation.

The Consumer and Wealth Management division’s revenues were $1.97 billion, 19% higher than the year-ago reported figure. Increased revenues from wealth management (up 22%) and consumer banking (up 8%) resulted in the upsurge.

The Asset Management division recorded revenues of $2.89 billion, indicating a 10% year-over-year decline. The downside resulted from notably lower net revenues in equity investments as well as lending and debt investments.

Firmwide assets under supervision reached a record $2.47 trillion, up 15.5% year over year.

Capital Position Weak, Profitability Down

As of Dec 31, 2021, the standardized Common Equity Tier 1 capital ratio was 14.2%. The figure was down from the prior-year quarter’s 14.7%. The company’s supplementary leverage ratio was 5.6% as of Dec 31, 2021, down from the prior-year quarter figure of 7%.

Also, return on average common shareholders’ equity (on an annualized basis) decreased to 15.6% in the reported quarter.

Capital Deployment Update

In the quarter under review, Goldman returned $1.20 billion of capital to common shareholders. This included share repurchases worth $500 million and common stock dividends of $698 million.

Medium-Term and Long-Term Financial Targets

ROE is expected to be greater than 13%, while return on tangible equity to be more than 14%. Efficiency ratio is expected to be around 60%. CET1 ratio is projected to be 13-13.5%.

Funding optimization is expected to be $1 billion. Expense efficiency savings estimated to be $1.3 billion (achieved half in 2020). Deposit growth expected to be $100 billion (reached $70 billion in 2020).

Over the long term, in IB, management expects transaction banking revenues worth $1 billion and deposits worth $50 billion in more than five years horizon. Revenue generation from expanded client footprint is anticipated to be in the range of $500 million to $2 billion.

In Global Markets, $700 million expense efficiencies and $2 billion capital optimization is projected.

In Asset Management, $250 billion worth net traditional inflows (including both equity and fixed-income) and $150 billion worth net alternative inflows is anticipated.

In Consumer and Wealth Management, overall expansion is anticipated with the aim of building leading digital consumer bank.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates.

VGM Scores

Currently, Goldman has a poor Growth Score of F, a grade with the same score on the momentum front. However, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of D. 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.