Investment banking firm Goldman Sachs Group Inc. (GS) reported a 27% rise in its fiscal 2018 first-quarter earnings, compared with the similar period last year. The bank crushed the earnings and revenue estimate of analysts. The company also raised its quarterly dividend. Furthermore, Goldman Sachs also reported higher revenues across all its segments. Therefore, we are expecting the stock of Goldman Sachs, which closed at $254 to appreciate further in the days to come.
The New York-based bank reported fiscal 2018 first-quarter revenues of $10.04 billion, up 25% from $8.03 billion last year. For 1Q18, Wall Street’s trading giant recorded a net profit of $2.737 billion, or $6.95 a share, compared with $2.162 billion, or $5.15 per share in the corresponding period last year. According to Thomson Reuters, analysts were expecting earnings of $2.21 billion, or $5.58 per share, on revenues of $8.74 billion.
Segment-wise, Investment banking revenue increased 5% y-o-y to $1.793 billion. In particular, Underwriting revenues (equity & debt) increased to $1.207 billion in Q1 2018, from $947 million in 1Q17.
Institutional client services revenue was $4.385 billion in the first quarter of 2018, an increase of 31% from $3.359 billion in the corresponding quarter last year. In particular, Fixed Income, Currency and Commodities Client Execution revenues increased 23% y-o-y to $2.074 billion. Equities client execution revenues were $1.062 billion, compared with $552 million last year.
Investing & Lending revenues were $2.087 billion, an increase of $623 million from $1.464 billion reported in the year-ago period. In particular, Equities revenue grew 34% to $1.069 billion, while Debt securities revenues increased 53% to $1.018 billion.
Investment Management revenues rose 18% to $1.771 billion, from 1.50 billion in the recent quarter.
During the quarter, interest income and interest expense grew 54% and 49% to $4.23 billion and $3.31 billion, respectively. Goldman Sachs stated that its effective tax rate was 17.2% for the first quarter. The recent tax overhaul has reduced corporate tax from 35% to 21%.
Goldman Sachs has also increased the quarterly dividend by 5 cents to $0.80 per share, payable on June 28, 2018.
Goldman Sachs CEO Lloyd Blankfein said, “Solid performance across our businesses produced strong returns in the first quarter. We are well-positioned to serve our clients as the global economy continues to show strength and central banks unwind certain aspects of policy stimulus.”
David Solomon is expected to succeed Blankfein, as Harvey Schwartz, who shares the titles of co-chief operating officer and co-president, is leaving the bank on April 20. Blankfein has not revealed when he will step down. However, the market is speculating that he could step down from the current positions by 2019 but may continue to stay as Chairman. The robust results indicate that the stock of Goldman Sachs will remain bullish in the days to come.
The historical price chart indicates that the stock is range-bound between 247 and 274. The stochastic oscillator is ascending from the bullish zone. Therefore, we are expecting the stock to move up and even break the upper band of the range.
We are looking at the possibility of investing in a call option to gain from the impending breakout. An option contract may be bought from one of our binary brokers only if the stock is trading near $250 in the NYSE. Furthermore, the option contract should remain active for a period of one week.
Disclaimer: Any financial trading analysis offered here is our opinion and is not intended as advice or direction for investors. We cannot guarantee the success of any trades made as a consequence of this article, and we encourage traders to incorporate a strong money management strategy to limit losses when they enter the markets. Please use this article as part of your own research before formulating strategies prior to trading.
