Goldman Smashes Earnings Estimates in Q4

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Shares in Goldman Sachs are trading a little higher pre-market on Wednesday. The bank’s stock price has seen a more than 60% rally off the November lows. Although price is currently correcting a little from the recent highs, the near-term outlook remains bullish. This is in light of a strong set of Q4 earnings reported this week.

Earnings Beat

Goldman smashed analyst expectations with fourth-quarter earnings per share of $12.08 versus expectations of a $7.45 EPS. This marked a second consecutive quarter of earnings growth for the bank. It confirmed that its recovery from the damage suffered during wave one of the pandemic is well on track.

Revenues Beat

Along with better than expected earnings, Goldman also beat revenue expectations, posting revenues of $11.74 billion. This was comfortably above the $9.9 billion Wall Street was looking for. The breakdown of the group’s revenue performance was very impressive indeed.

Golan reported a 40% jump in equities trading revenues which came in at $2.39 billion, beating expectations for a $1.89 billion result. Investment banking revenues also saw big growth year on year, rising by 27% to $2.61 billion, beating forecasts for a $2.15 billion result. The growth here was mainly attributed to stronger revenues from stock underwriting and completed merger transactions.

Navigated The Pandemic

Commenting on the bumper results, Goldman CEO David Solomon said:

“We were able to help clients navigate a difficult environment, and, as a result, achieved strong results across the franchise, while advancing our strategic priorities. We hope this year brings much-needed stability and a respite from the pandemic, but we remain ready to handle a wide range of outcomes and are poised to meet the needs of our clients.”

Record Returns

Goldman has enjoyed a firm rebound over recent months due in large part to the success of its trading teams. The backdrop of better risk appetite in response to waves of monetary policy easing from the Fed and fiscal stimulus from the government means that Goldman is looking at record trading revenues.

Meanwhile, the bank’s investment banking business is set to benefit from the dramatic rise in demand for IPOs. The bank’s investment banking business saw record returns over 2020 of $9.42 billion while the trading division posted its best results in a decade, seeing a 43% increase from the prior year.

Goldman Shares Capped At Resistance

goldman sachs shares

The recent rally in Goldman’s shares has seen price breaking above the 275.71 level, trading up into the upper end of the bullish channel. However, price found selling interest at the 308.75 level which remains the high watermark for now.

To the downside, 275.71 is the next big support and while above here, the focus is on further upside. Below there. However,  the 254.17 level is the next support to watch.

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