On Jun 9, 2014, we issued an updated research report on
The Goldman Sachs Group, Inc.
). The company reported decent first-quarter 2014 results in April.
With the fall in revenues, on the whole disciplined expense
management was reflected. Moreover, Federal Reserve's approval of
its revised 2014 capital plan depicts financial stability.
Following the slump in total net revenues, Goldman's first-quarter
2014 earnings per share came in at $4.02, significantly below the
year-ago figure of $4.29. However, it surpassed the Zacks Consensus
Estimate of $3.43. The company's robust financial advisory revenues
and steady capital deployment activities were the positives.
In first-quarter 2014, the company repurchased shares worth $1.72
billion and paid $264 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 the last four
quarters, with an average beat of 19.03%.
However, during first-quarter 2014, Investment Banking operated in
an environment generally characterized by the ongoing macroeconomic
concerns with adverse weather conditions and weak business fixed
investment in the U.S. If macroeconomic concerns persist and result
in lower levels of client activity, net revenues in Investment
Banking would likely be negatively impacted.
Despite strong fundamentals, we believe there are certain issues
that may create pressure on the company's financials in the near
term. These include absence of a credible improvement in
fixed-income revenues and the prevailing stringent regulatory
Strong fundamentals have triggered an upward revision in the Zacks
Consensus Estimates, 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 3.3% to $15.92 for 2014
and jumped 1.3% to $16.99 per share for 2015, over the past 60
Goldman currently carries a Zacks Rank #3 (Hold).
Key Picks from the Sector
Better-ranked stocks in the same sector worth considering include
Arlington Asset Investment Corp.
Piper Jaffray Companies
) with a Zacks Rank #1 (Strong Buy), while
JMP Group Inc.
) carries a Zacks Rank #2 (Buy).
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