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Here's Why You Should Hold Goldman (GS) in Your Portfolio
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The Goldman Sachs Group, Inc. (GS - Free Report) is making diligent efforts to refocus its business on core strengths and reduce its consumer banking footprint.Inorganic growth efforts will diversify its fee revenue base while capital deployment activities seem sustainable, given a solid liquidity position. However, sluggish capital market activity is likely to impede trading revenues in the near term. Also, GS’ bottom line has been affected in the past few years by its rising cost base.
Specifically, the company is refocusing its business on its core strengths of investment baking (IB) and trading while reducing its consumer banking footprint. In line with this, in April 2023, the company announced it is initiating a process to explore the sale of GreenSky. Also, Goldman aims to cease unsecured loan offerings to consumers through Marcus. In the first quarter of 2023, the firm sold $1 billion of Marcus loans.
Focus on IB business expansion is a strategic fit given Goldman’s solid position in worldwide announced and completed M&As. Moreover, robust client engagement, backed by digital disruption and transformation trends, and the company’s decent investment banking backlog are positives. While IB fees are expected to decline in 2023 owing to a global deal slump, the same is projected to increase 11.6% in 2024.
Goldman is making efforts to diversify its business mix toward more recurring revenues and durable earnings. These are underlined by the buyout of Dutch asset manager NN Investment Partners and robo-advisor NextCapital, among others. Through such efforts, the company has positioned itself as one of the top five active asset managers globally.
Also, it enjoys decent earnings strength, a steady capital position and a solid credit profile. This has enabled it to consistently enhance shareholders’ value with steady capital deployment activities.GS has a $30-billion share repurchase program in place. Also, in July 2022, the company announced an increase in the quarterly dividend by 25%.
However, expenses saw a four-year compound annual growth rate (CAGR) of 7.4% in 2022, with the uptrend continuing in first-quarter 2023. Investments in technology and market development expenses for business expansion will keep the expense trend volatile in the upcoming period. For 2023 and 2024, expenses are expected to rise 1.2% and 4.9%, respectively.
Amid increasing volatility due to an evolving macroeconomic backdrop, geopolitical concerns, inflation and regional banking collapses, Goldman might see limited market-making opportunities in the Global Banking and Markets division. GS expects trading revenues to decline 25% year over year in second-quarter 2023 due to sluggish capital market activity, and muted equities and fixed-income activity levels compared with the year-ago period.
Over the past six months, shares of GS have declined 7.5% compared with the industry’s fall of 11.9%.
A couple of better-ranked stocks from the finance space are BNP Paribas (BNPQY - Free Report) and First Citizens BancShares (FCNCA - Free Report) .
The Zacks Consensus Estimate for BNP Paribas’ current-year earnings has been revised 15.3% upward over the past 60 days. Its shares have gained 6.6% in the past six months. Currently, BNPQY carries a Zacks Rank #2 (Buy).
First Citizens BancShares sports a Zacks Rank #1 at present. Its earnings estimates for 2023 have been revised 67.2% upward over the past 60 days. In the past six months, FCNCA’s shares have rallied 62.4%.
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Here's Why You Should Hold Goldman (GS) in Your Portfolio
The Goldman Sachs Group, Inc. (GS - Free Report) is making diligent efforts to refocus its business on core strengths and reduce its consumer banking footprint.Inorganic growth efforts will diversify its fee revenue base while capital deployment activities seem sustainable, given a solid liquidity position. However, sluggish capital market activity is likely to impede trading revenues in the near term. Also, GS’ bottom line has been affected in the past few years by its rising cost base.
Specifically, the company is refocusing its business on its core strengths of investment baking (IB) and trading while reducing its consumer banking footprint. In line with this, in April 2023, the company announced it is initiating a process to explore the sale of GreenSky. Also, Goldman aims to cease unsecured loan offerings to consumers through Marcus. In the first quarter of 2023, the firm sold $1 billion of Marcus loans.
Focus on IB business expansion is a strategic fit given Goldman’s solid position in worldwide announced and completed M&As. Moreover, robust client engagement, backed by digital disruption and transformation trends, and the company’s decent investment banking backlog are positives. While IB fees are expected to decline in 2023 owing to a global deal slump, the same is projected to increase 11.6% in 2024.
Goldman is making efforts to diversify its business mix toward more recurring revenues and durable earnings. These are underlined by the buyout of Dutch asset manager NN Investment Partners and robo-advisor NextCapital, among others. Through such efforts, the company has positioned itself as one of the top five active asset managers globally.
Also, it enjoys decent earnings strength, a steady capital position and a solid credit profile. This has enabled it to consistently enhance shareholders’ value with steady capital deployment activities.GS has a $30-billion share repurchase program in place. Also, in July 2022, the company announced an increase in the quarterly dividend by 25%.
However, expenses saw a four-year compound annual growth rate (CAGR) of 7.4% in 2022, with the uptrend continuing in first-quarter 2023. Investments in technology and market development expenses for business expansion will keep the expense trend volatile in the upcoming period. For 2023 and 2024, expenses are expected to rise 1.2% and 4.9%, respectively.
Amid increasing volatility due to an evolving macroeconomic backdrop, geopolitical concerns, inflation and regional banking collapses, Goldman might see limited market-making opportunities in the Global Banking and Markets division. GS expects trading revenues to decline 25% year over year in second-quarter 2023 due to sluggish capital market activity, and muted equities and fixed-income activity levels compared with the year-ago period.
Over the past six months, shares of GS have declined 7.5% compared with the industry’s fall of 11.9%.
Image Source: Zacks Investment Research
Currently, the company carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Stocks Worth a Look
A couple of better-ranked stocks from the finance space are BNP Paribas (BNPQY - Free Report) and First Citizens BancShares (FCNCA - Free Report) .
The Zacks Consensus Estimate for BNP Paribas’ current-year earnings has been revised 15.3% upward over the past 60 days. Its shares have gained 6.6% in the past six months. Currently, BNPQY carries a Zacks Rank #2 (Buy).
First Citizens BancShares sports a Zacks Rank #1 at present. Its earnings estimates for 2023 have been revised 67.2% upward over the past 60 days. In the past six months, FCNCA’s shares have rallied 62.4%.