Goldman Sachs’ GS organic growth and cost management initiatives continue to drive its overall performance. Also, its leading global position supports investment banking revenues. However, pending litigation issues remain a key concern. Also, performance of Institutional Client Services division is affected by market developments and client volumes.
Further, the company’s earnings estimates have remained stable for the current year over the past 30 days. As a result, the stock currently carries a Zacks Rank #3 (Hold).
The stock has gained nearly 1% over the past six months against 7.2% decline of the industry.
Goldman’s expense reduction initiatives have supported bottom-line growth. The company is focused on improving efficiency while maintaining strong franchise and investing in new opportunities. Notably, it completed an expense initiative and generated nearly $900 million of run rate savings.
Goldman’s rising investment banking revenues provided decent support to Goldman’s top line. Also, steady economic growth and low interest rates in the emerging economies, along with growth in corporate earnings on tax reforms, are likely to keep the momentum of M&A activities and financial advisory business alive in the quarters ahead.
Furthermore, the key source of the company’s earnings stability is its business diversification. Within traditional banking, a diversified product portfolio has higher chances of sustaining growth than many other banks, which have exited some of these areas.
However, Institutional Client Services division faces a challenging environment depicting lower client activity levels, along with political uncertainty, legislative challenges in the United States, and low volatility, which affected performance of this division. Therefore, future performance of this volatility-driven division depends on market developments and client volumes.
Also, Goldman continues to face many investigations and lawsuits from investors and regulators. All these are expected to lead to increased expenses and litigation provisions in the near term. Goldman has been entangled in the recent heightened scandal related to the multibillion-dollar 1Malaysia Development Bhd, which is a major concern.
Stocks to Consider
Some better-ranked stocks from the finance space are Raymond James Financial RJF, LPL Financial Holdings LPLA and Stifel Financial Corporation SF. All these stocks currently sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Over the past 60 days, Raymond James witnessed an upward earnings estimate revision of 4.5% for the current year. Its share price has risen 6.7% over the past six months.
The Zacks Consensus Estimate for LPL Financial’s current-year earnings has been revised 9.6% upward over the past 60 days. Its share price has increased 28.7% over the past six months.
Stifel Financial has witnessed upward earnings estimate revision of 5.6% for current year over the past 60 days. Its share price has improved 15% over the past six months.
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The Goldman Sachs Group, Inc. (GS) : Free Stock Analysis Report
Raymond James Financial, Inc. (RJF) : Free Stock Analysis Report
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