On Mar 5, 2014, we issued an updated research report on The Goldman Sachs Group, Inc. (GS). The company reported disappointing fourth-quarter 2013 results in January compared with the prior-year period. With the fall in revenues, on the whole undisciplined expense management was reflected. However, Federal Reserve’s approval of its re-submitted capital plan in 2013 depicts financial stability.
Following the slump in fixed income trading revenues, Goldman’s fourth-quarter 2013 earnings per share came in at $4.60, significantly below the year-ago figure of $5.60. However, it surpassed the Zacks Consensus Estimate of $4.14. The company’s robust equity underwriting revenues and steady capital deployment activities were the positives.
In 2013, the company repurchased shares worth $6.2 billion and paid $988 million as common stock dividends. Moreover in Oct 2013, Goldman’s board of directors announced a 10% hike in the quarterly common stock dividend. Such a shareholder-friendly approach is expected to act as a catalyst for the stock.
Goldman has outpaced the Zacks Consensus Estimate in all the four quarters of 2013, with an average beat of 17.59%.
However, during 2013, Investment Banking operated in an environment generally characterized by the ongoing macroeconomic concerns, although there were positive developments in the U.S. economy. If macroeconomic concerns persist and result in lower levels of client activity, net revenues would likely be negatively impacted.
Strong fundamentals have triggered an upward revision in the Zacks Consensus Estimates for Goldman, as analysts become more bullish on the stock’s future performance. This is evident from the movement witnessed in the Zacks Consensus Estimate that increased 3.1% to $15.70 for 2014 and jumped 4.1% to $16.93 per share for 2015, over the past 60 days.
Hence, Goldman currently carries a Zacks Rank #2 (Buy).
Key Picks from the Sector
Other stocks in the same sector worth considering include JMP Group Inc. (JMP), Fifth Third Bancorp (FITB) and The PNC Financial Services Group, Inc. (PNC). All 3 carry a Zacks Rank #2.
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