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Will Headwinds Continue to Hurt Goldman's Profitability?

On Dec 21, 2015, we issued an updated research report on The Goldman Sachs Group, Inc.GS . Notably, shares of this New York-based investment manager have lost more than 7% year to date.

A challenging environment depicting significant decrease in global equity prices and lower client activity levels continue to impact Institutional Client Services division. Notably, net revenues in Fixed Income, Currency and Commodities Client Execution witnessed a 14% year over year decline for the nine months ended Sep 30, 2015.

Further, Goldman continues to face many investigations and lawsuits from investors and regulators. Though the company resolved certain litigations and proceedings, many of the cases are yet to be resolved, which may result in increased expenses and litigation provisions in the near term. Additionally, stricter capital requirement is expected to reduce Goldman's flexibility with respect to its business investments to some extent.

Nevertheless, the company remains focused on expense management and revenue growth apart from maintaining a strong capital position and steady capital deployment activities.

Notably, during the first nine months of 2015, revenues touched $26.5 billion, backed by strong financial advisory revenues. We believe Goldman is well positioned to maintain this trend going forward. Notably, from 2012 to 2014, investment banking and investment management generated $2.4 billion of incremental revenues, reflecting the company's strength of client franchise and the diversity of operations.

Over the past 30 days Zacks Consensus Estimate declined 2.9% to $18.13 per share for 2015. Also, for 2016, it declined nearly 1% to $18.89 per share. Goldman currently carries a Zacks Rank #4 (Sell).

Stocks to Consider

Some better-ranked stocks in the finance space include Franklin Financial Network, Inc. FSB , National Bank Holdings Corp. NBHC and New York Community Bancorp Inc. NYCB . All the three stocks sport a Zacks Rank #1 (Strong Buy).

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Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

GOLDMAN SACHS (GS): Free Stock Analysis Report

NEW YORK CMNTY (NYCB): Free Stock Analysis Report

NATIONAL BK HLD (NBHC): Free Stock Analysis Report

FRANKLIN FNL NW (FSB): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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