💰 Goldman Sachs: Is Great Not Good Enough?
Google slapped with record fine! JPM's profit soars.
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💰 Goldman Sachs: When Is Great Not Good Enough? - Part II
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Expectations were high from the best performing stock on the Dow Jones (DJIA) this year. Goldman Sachs Inc. (GS) not only managed to come good on them but also surpassed them by a margin. With shares rising over 40% this year, have investors already priced in the outperformance? (Tweet This)
The Go-Go Twenties
Global equities, including those in the US, have staged a strong comeback from the pandemic-driven sell-off last year. Retail participation in equity markets is on the rise. Add to it, the booming IPO market. Companies have been rushing to go public since last fall to take advantage of the stock markets trading at record highs.
Capital raised via traditional IPOs this year so far has been a record-breaking $135B, more than double its five-year average of $53B annually. Dealmakers too have had a year to remember. Mergers & Acquisitions across the globe have totalled $2.4T this year so far, up 158% from the same period last year.
A big deal driver this year has been Special Purpose Acquisition Companies or SPACs. For instance, just in the month of May 2021, SPACs have accounted for 11% of the global M&A activity.
The protagonist of today’s story, Goldman Sachs! The New York-based bank ranked No.1 in global M&As, worldwide equity and equity-related offerings, and common stock offerings along with IPOs. For those who thought that the record revenue posted by the company in Q1 was just a one-off event, Tuesday's results blew away those guesstimates.
Beyond Great Expectations
Goldman Sachs crushed expectations in Q2.
Key Stats From Q2:
Revenue: $15.39B Vs $12.17B expected - Second highest quarterly revenue
Earnings Per Share: $15.02 Vs $10.24 - Second highest in a quarter
Some of the business verticals actually outperformed what was thought to be a high watermark set in Q1.
Highest Quarterly Revenue: Asset Management, Consumer & Wealth Management
Second Highest Quarterly Revenue: Investment Banking, Financial Advisory, Equity & Debt Underwriting.
Shareholders have been commensurately rewarded as well. Goldman Sachs’ board has approved a 60% hike in the quarterly dividend to $2 per common share, starting Q3 2021. This follows the approval from the Federal Reserve, which allowed banks to unlock excess capital after clearing a stress test. US banks were poised to pay over $142B in capital to shareholders.
With the share price rise this year and concomitant quarterly performance, it seems a forgive-and-forget routine is underway between the company and its investors, at least as far as the 1MDB scandal is concerned.
It will no doubt be a challenge to match this level of performance consistently in future quarters, especially when equity markets and M&As inevitably revert to the mean. For now, any investor would take a 40% return on their investment and hope for more upside going forward.
GS ended at $375.98, down 1.19%.
Company Snapshot 📈
GS $375.98 -4.52 (-1.19%)
Analyst Ratings (27 Analysts) BUY 67% HOLD 29% SELL 4%
Passing On: PepsiCo and Conagra plan to battle rising costs with higher prices (PEP +2.31%)
Uncertainty: JPMorgan profit soars on recovery but questions linger over lending outlook, competition (JPM -1.72%)
Penalty: Google hit with record $593M fine in France in news copyright battle (GOOGL +0.29%)
Later Today 🕒
Bank of America Corp. Earnings (BAC)
Wells Fargo & Co. Earnings (WFC)
Citigroup Inc. Earnings (C)
BlackRock Inc. Earnings (BLK)
Delta Air Lines Inc. Earnings (DAL)
6 PM IST: Producer Price Index
11:30 PM IST: Fed Beige Book
Fun Fact of The Day 🌞
Michael Jordan makes more money from Nike annually than all of the Nike factory workers in Malaysia combined
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