Goldman Sachs (NYSE: GS) delivered outstanding Q3 earnings continuing its string of earnings performances as its business has experienced an acceleration during the pandemic. Following the earnings report, share prices were higher by about 3%, continuing its outperformance relative to other banks and the broader market since the pandemic.
The results weren't exactly surprising given that other earnings reports from banks showed strong performance in investment banking, trading, and wealth management which make up the bulk of Goldman's revenues. On top of that, equity markets have been strong, while the IPO market is robust in addition to an active M&A market.
Inside the Numbers
In Q3, Goldman Sachs posted $14.93 in earnings per share, topping consensus expectations of $10.18 per share. Revenue also beat at $13.61 billion vs. $11.68 billion consensus estimates. In total, this was a 63% increase in earnings and a 26% jump in revenue.
Some of the headline figures from the report were a nearly 90% increase in investment banking revenue and record fees from equity financing. While all banks posted impressive figures in these segments, Goldman's numbers were even more impressive relative to rivals like JPMorgan (NYSE: JPM) and Morgan Stanley (NYSE: MS). Some of the areas contributing were M&A transactions, debt and equity underwriting, and advisory revenue.
Overall, the markets division contributed $5.6 billion in revenue, a 23% increase with weakness in bond trading offset by a jump in equity financing. Goldman's consumer and wealth management division saw revenue rise 35% to $2.02 billion, beating the $1.79 billion estimate.
Another interesting point about Goldman's report is that the bank didn't have a tailwind in terms of loan loss reserves like other banks which makes its growth and beat that much more impressive. The company also completed its acquisition of GreenSky which is consistent with its strategy of becoming more of a tech company than a financial one.
Stock Price Outlook
Goldman shares were up nearly 50% YTD, eclipsing the 39% gain of the XLF. Overall, Goldman continues to be an attractive stock given its dominance of the IPO market and other lucrative niches. Despite recent gains, it is attractively priced with a forward P/E of 10 and a 2% dividend yield.
Goldman is the last of the six biggest U.S. banks to report earnings. JPMorgan, Bank of America (NYSE: BAC), Morgan Stanley, Citigroup (NYSE: C) and Wells Fargo (NYSE: WFC) exceeded expectations for profit and revenue, helped by reserve releases and strong investment banking revenue.