The Goldman Sachs Group, Inc. (GS Quick QuoteGS - Free Report) is scheduled to release fourth-quarter 2024 earnings on Jan. 15 before the opening bell.

Goldman’s close peer JP Morgan (JPM Quick QuoteJPM - Free Report) is slated to announce quarterly numbers on Jan. 15, whereas Morgan Stanley (MS Quick QuoteMS - Free Report) will come out with its performance details on Jan. 16. Stay up-to-date with all quarterly releases: See Zacks Earnings Calendar.

In the third quarter of 2024, Goldman's results benefited from the strength in investment banking (IB) business. However, a rise in provisions and a weak capital position were concerning.

Goldman has an impressive earnings surprise history. The company’s earnings outpaced the Zacks Consensus Estimate in the trailing four quarters, with an average earnings surprise of 29.33%.

Earnings Surprise History

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Let us see how GS is expected to fare in terms of revenues and earnings this time.

The Zacks Consensus Estimate for fourth-quarter revenues is pegged at $12.13 billion, calling for a 7% rise from the year-ago quarter's reported figure.

In the past seven days, the consensus estimate for quarterly earnings has been revised downward to $7.87 per share. However, the projection suggests a rally of 43.6% from the year-ago quarter's reported figure.

Estimate Revision Trend

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Factors to Shape GS’s Q4 Results

Market-Making Revenues: The fourth quarter saw strong client activities and market volatility. Client activities were driven by the prospect of a robust economic expansion, a slowdown in inflation and an easing of monetary policy. Additionally, volatility was high in equity markets and other asset classes, including commodities, bonds and foreign exchange. Therefore, Goldman's market-making revenues are likely to have witnessed a rise in the quarter to be reported.

IB Fees: Global mergers and acquisitions (M&As) improved significantly in the fourth quarter of 2024, following a weak performance in 2023 and 2022. Deal value and volume increased in the quarter, owing to strong financial performance, robust U.S. economic growth, buoyant markets and interest rate reduction. The possibility of lowering regulatory monitoring on M&As by the incoming Trump administration encouraged deal-making activity. However, persisting geopolitical difficulties hampered progress.

Given market volatility, geopolitical concerns and global monetary easing, the IPO market has shown signals of cautious optimism. The strong performance of the equity market prompted a surge in follow-up equity issuances. Despite typically low volumes in December, bond issuance activity was decent due to positive economic conditions and corporate spreads at near-historic lows.

GS’s leadership position in worldwide announced and completed M&As, equity and equity-related offerings and common stock offerings, is likely to have provided it an edge over its peers. These factors are likely to have favorably impacted the company’s quarterly IB revenues.

The Zacks Consensus Estimate for IB fees of $2.05 billion indicates 24% growth from the year-ago reported level.

Net Interest Income (NII):  A stabilizing macroeconomic backdrop, along with the clarity on the Fed interest rate cuts, is likely to have offered some support to the lending scenario in the quarter to be reported. Per the Fed’s latest data, the demand for loans, especially commercial and industrial loans, was modest in the first two months of the quarter. Hence, loan growth for Goldman is likely to have been decent.

The Federal Reserve cut interest rates by 50 basis points to 4.25-4.5% in the fourth quarter. This, along with the rate cut in September, led the funding/deposit costs to stabilize. This is likely to have offered some support to Goldman’s NII in the fourth quarter.  

The Zacks Consensus Estimate for NII’s is pegged at $2.08 billion, suggesting a 5.6% year-over-year rise.

Expenses: Goldman’s investments in technology and market development expenses for business expansion and a rise in transaction-based expenses due to higher client activity are anticipated to have led to increased expenses in the to-be-reported quarter.

What Our Model Unveils for Goldman

Our proven model conclusively predicts an earnings beat for Goldman Sachs this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.

Goldman has an Earnings ESP of +2.47% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

GS’s Price Performance & Valuation

In the fourth quarter, Goldman's shares underperformed its industry while outperforming the S&P 500 index.

4Q24 Price Performance

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Let us look at the value GS offers investors at the current levels.

Currently, Goldman is trading at 13.43X forward 12-month earnings. Meanwhile, the industry’s forward earnings multiple sits at 13.98X. The company’s valuation looks somewhat inexpensive compared with the industry average.

Price-to-Earnings F12M

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GS is trading at a discount compared with its peers JPM’s forward 12-month earnings of 16.71X and MS’s forward 12-month earnings of 14.47X.

Goldman’s Investment Thesis

Goldman is scaling back its consumer banking footprint to shift its focus and grow trading and IB businesses, wherein it has showcased encouraging results, given its strong leadership position, wide scale of operations and exceptional talent. Also, the Donald Trump administration is likely to be friendlier toward corporate mergers as the easing of some rules for big banks and more leniency in approving merger deals are expected, which will boost its IB businesses.

Further, Goldman plans to ramp up its lending services to private equity and asset managers and aims to expand internationally. Goldman Asset Management — a unit of GS — intends to expand its private credit portfolio to $300 billion in five years, positioning it for long-term growth.

GS continues to reward its shareholders handsomely. In July 2024, it increased its common stock dividend by 9.1% to $3 per share. In the past five years, The company has hiked dividends four times, with an annualized growth rate of 24.53%. Currently, its payout ratio sits at 35% of earnings.

However, mounting expenses due to investment in technology and business expansion will likely limit the company’s growth.

Final Thoughts on Goldman

Decent client activities, an improving lending scenario and solid capital markets businesses (especially the IB business) paint a favorable picture for Goldman.

GS’s efforts to refocus on core capital markets business and expansion in the private equity credit line position it well for growth. Further, more leniency in approving merger deals under the Trump administration will offer support to the company’s IB business in the upcoming period.

While Goldman’s solid fundamentals and strong prospects remain promising, investors should not rush to buy the stock. The company’s rising expenses and bearish analyst sentiments warrant a caution.

To get clarity and possibly an appealing entry point, those interested in adding it to their portfolios might be better off waiting until after the quarterly results are out. Also, they should keep an eye on macroeconomic factors that are likely to influence the company’s performance. Those who already have the GS stock can consider retaining it, given its strong fundamentals and growth potential.