Goldman Sachs Shines with Strong Q3 Performance Amid Sector Shifts
Investment bank The Goldman Sachs Group Inc. (NYSE: GS) showcased exceptional strength in its third quarter of 2024. The firm has been streamlining its focus by divesting consumer-centric assets such as credit card partnerships and personal loan portfolios. This strategic shift solidifies its commitment to investment banking and wealth management. The Asset & Wealth Management segment posted a 16% year-over-year revenue increase, reaching $3.75 billion, as assets under supervision (AUS) climbed to an impressive $3.10 trillion, driving management fees to record heights of $2.62 billion.
Goldman Sachs continues to capitalize on a more active IPO and underwriting market, a trend likely to persist as interest rates decline. With its strong financial results, Goldman Sachs sets a high benchmark for peers like Morgan Stanley (NYSE: MS) and JPMorgan Chase & Co. (NYSE: JPM).
Contrasting Financial Trends: Investment Banks vs. Consumer Banks
Notably, Goldman Sachs and other investment banks are experiencing contrasting performances compared to consumer-centric banks like Wells Fargo and Co. (NYSE: WFC). In Q3 2024, Wells Fargo faced an 11% drop in net interest income, while Goldman Sachs’s net interest income surged 70% year-over-year, achieving $2.62 billion.
While Wells Fargo’s investment banking revenues shrank by 2.56% to $419 million, Goldman Sachs saw a 20% rise in investment banking fees, reaching $1.87 billion. This achievement underscores its leading position in mergers and acquisitions and stock offerings. The backlog in investment banking keeps growing each quarter as the interest rate cuts take effect.
On the other hand, Goldman Sachs’s revenue from fixed income, currency, and commodities (FICC) declined by 12% year-over-year to $2.96 billion, influenced by lower returns in commodities and interest-rate products, while Wells Fargo reported a 16% increase in these fees. Goldman faced tougher comparisons, given its prior strong performance in Q3 2023.
Core Business Segments Show Robust Growth
Returning to its core focus, Goldman Sachs significantly benefited from the revival of IPOs and mergers and acquisitions. In the recent quarter, its Asset & Wealth Management segment generated $3.75 billion, with AUS increasing by $169 billion, resulting in a record $3.10 trillion. Additionally, the Global Banking and Markets segment recorded a 7% revenue increase to $8.55 billion. Advisory revenue rose by 5% to $875 million, while equity underwriting fees shot up by 25% to $385 million, all fueled by a brisk IPO atmosphere. Furthermore, investment debt underwriting fees surged 46% to $605 million.
Goldman Sachs Exceeds Expectations Yet Again
For Q3 2024, Goldman Sachs achieved an earnings per share (EPS) of $8.40, surpassing analysts’ predictions by $1.61. Revenues climbed 7.4% year-over-year to $12.7 billion, exceeding expectations of $11.77 billion by nearly $1 billion. The firm has maintained its full-year forecast and declared a dividend of $3.00 per share for shareholders of record on December 2, 2024, payable on December 30, 2024.
CEO David Solomon remarked, “The U.S. economy remains resilient. Inflation is decreasing, and recent unemployment data is promising. Although consumer behavior shows some softness, my discussions with clients have been optimistic. The onset of rate cuts has fostered a renewed hope for a soft landing, likely boosting economic activity.”
Technical Insights: GS Stock in an Ascending Triangle
An ascending triangle pattern forms when a flat top upper trendline meets an upward-sloping lower trendline, signaling a potential breakout when the price passes through the upper resistance. This behavior occurred with GS stock following its earnings announcement.
Goldman Sachs shares broke through the $517.26 flat-top resistance, moving above the $528.83 Fibonacci level before possibly reverting below $525.98. Daily anchored VWAP support stands at $495.33.
The daily relative strength index (RSI) reached an overbought level of 76. Fibonacci pullback support levels are identified at $517.26, $500.16, $486.74, and $467.89.
Goldman Sachs’s average consensus price target is $524.68, with the highest analyst target at $614.00. Current ratings include 14 Buy recommendations and five Hold ratings, with the stock trading at 14.88 times forward earnings.
Actionable Options Strategies: Bullish investors may consider cash-secured puts to acquire GS shares at the Fibonacci pullback support levels, along with writing covered calls to create additional income alongside a 2.27% annual dividend yield.
The views and opinions expressed herein are those of the author and do not necessarily reflect the views of Nasdaq, Inc.
