Goldman Sachs crushed 3Q estimates as adjusted EPS surged 102% to $9.68 per share year-over-year, surpassing analysts’ expectations of $5.57 per share. The financial institution’s quarterly revenues of $10.8 billion beat the Street consensus of $9.5 billion.
Goldman’s (GS) top-line increased 30% year-over-year, reflecting higher revenues across all segments, with a significant rise in Asset Management and Global Markets, the firm said. However, 3Q revenues declined 19% versus the 2Q. The company’s annualized return on average common shareholders’ equity (ROE) of 17.5% in 3Q was the highest quarterly ROE since 2010.
The company said “The operating environment continued to recover during the third quarter of 2020 from the impact of the COVID-19 pandemic earlier in the year as global economic activity significantly rebounded following a sharp decrease in the second quarter, market volatility declined modestly, and monetary and fiscal policy remained accommodative. As a result, global equity prices increased and credit spreads tightened compared with the end of the second quarter of 2020.” (See GS stock analysis on TipRanks).
On Sept. 30, Merrill Lynch analyst Michael Carrier added Goldman stock to its US 1 List, and reiterated a Buy rating with a price target of $240 (13.9% upside potential), citing multiple drivers for ROE improvement. Carrier said “We view GS as attractive given a favorable near term revenue backdrop, strategic initiatives in place to drive additional revenue growth ahead, a management team focused on improving its efficiency ratio and capital needs, and a stock trading below tangible book value.”
Currently, the Street has a cautiously optimistic outlook on the stock. The Moderate Buy analyst consensus is based on 10 Buys and 5 Holds. The average price target of $250.64 implies 18.9% upside potential. Shares have dropped about 8.3% year-to-date.