On Wednesday, Barclays (LON:BARC) maintained its Overweight rating on Goldman Sachs (NYSE: GS) and increased the price target to $588 from $565.
The adjustment follows Goldman Sachs' earnings performance, which surpassed expectations, largely due to significant revenue contributions from its Global Markets division. The firm's earnings per share (EPS) came in higher than consensus estimates, with Global Markets revenue showing a 2% year-over-year increase, contrary to the guided 10% decrease.
The bank's year-to-date compensation ratio, excluding provisions, is reported to be 100 basis points lower than the previous year. Although Goldman Sachs slowed down its share repurchase program to $1 billion compared to $3.5 billion in the second quarter of 2024, the figure aligns with Barclays' forecasts. Goldman Sachs has also reiterated its stance on share buybacks, considering them attractive even at higher valuations.
In the investment banking sector, Goldman Sachs noted ongoing active engagement from Corporates and Sponsors. The bank is experiencing robust demand from clients, which is reflected in the growth of its investment banking backlog both year-over-year and from the second quarter of 2024. This growth was primarily driven by advisory services.
Goldman Sachs remains optimistic about the future of capital markets, suggesting that the current phase represents just the beginning of their reopening. The bank highlighted that Equity Capital Markets (ECM) volumes are still below long-term averages, while Debt Capital Markets (DCM) activity continues to be strong.
In DCM, Goldman Sachs has observed a significant uptick in client demand for committed acquisition financing and anticipates this trend to persist, supported by an increase in Merger and Acquisition (M&A) activity.
In other recent news, Goldman Sachs Group Inc (NYSE:GS) reported robust third-quarter results for 2024, with net revenues of $12.7 billion and earnings per share of $8.40, marking a 54% increase year-over-year. The company's return on equity (ROE) stood at 10.4%, and the return on tangible equity (ROTE) reached 11.1%.
Goldman Sachs' assets under supervision reached a record high of over $3 trillion. The firm's Global Banking and Markets division saw significant growth, with fixed income, currency, and commodities revenues reaching $3 billion and equities revenues at $3.5 billion.
The Asset and Wealth Management segment achieved a record $3 trillion in assets under supervision, marking 27 consecutive quarters of net inflows. The company returned $2 billion to shareholders through dividends and stock repurchases in the third quarter.
Looking ahead, Goldman Sachs aims to improve margins in Asset and Wealth Management, with aspirations to exceed a 30% pretax margin by improving operational efficiencies and scaling business lines. These are among the recent developments at Goldman Sachs.
InvestingPro Insights
Goldman Sachs' strong performance and optimistic outlook are reflected in recent InvestingPro data and tips. The company's P/E ratio of 15.35 and adjusted P/E ratio of 13.63 for the last twelve months as of Q3 2024 suggest that the stock may be undervalued relative to its earnings potential. This aligns with an InvestingPro Tip indicating that Goldman Sachs is "Trading at a low P/E ratio relative to near-term earnings growth."
The company's financial health is further underscored by its revenue growth of 11.97% over the last twelve months and a robust gross profit margin of 83.24%. These figures support Goldman Sachs' position as a "Prominent player in the Capital Markets industry," another InvestingPro Tip.
Investors may also be encouraged by Goldman Sachs' dividend performance. The company has raised its dividend for 12 consecutive years and maintained payments for 26 years, according to InvestingPro Tips. With a current dividend yield of 2.3% and a dividend growth rate of 20% over the last twelve months, Goldman Sachs demonstrates a commitment to shareholder returns.
The market seems to recognize Goldman Sachs' strength, with the stock trading at 96.65% of its 52-week high. This is consistent with the InvestingPro Tip noting a "Large price uptick over the last six months," reflected in the impressive 33.21% price total return over that period.
For investors seeking more comprehensive analysis, InvestingPro offers 14 additional tips for Goldman Sachs, providing a deeper understanding of the company's financial position and market performance.
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