Should Goldman be Part of Your Portfolio Ahead of Its Q4 Earnings?

Core Viewpoint - Goldman Sachs is expected to report strong earnings for the fourth quarter of 2024, driven by robust investment banking performance, despite concerns over rising provisions and a weak capital position [2][22]. Group 1: Earnings and Revenue Estimates - The Zacks Consensus Estimate for fourth-quarter revenues is $12.13 billion, indicating a 7% increase from the previous year [5]. - The consensus estimate for quarterly earnings has been revised downward to $7.87 per share, suggesting a 43.6% increase from the year-ago quarter [5]. Group 2: Factors Influencing Q4 Results - Strong client activities and market volatility are expected to boost market-making revenues, driven by economic expansion prospects and easing monetary policy [8]. - Global mergers and acquisitions (M&As) have improved significantly, with deal value and volume increasing due to strong financial performance and robust U.S. economic growth, despite geopolitical challenges [9]. - The IPO market shows cautious optimism, with a surge in follow-up equity issuances and decent bond issuance activity due to favorable economic conditions [10]. - Goldman is expected to report IB fees of $2.05 billion, reflecting a 24% growth from the previous year [11]. - Net Interest Income (NII) is estimated at $2.08 billion, suggesting a 5.6% year-over-year rise, supported by a stabilizing macroeconomic backdrop and recent Federal Reserve interest rate cuts [13]. Group 3: Company Performance and Valuation - Goldman Sachs has a history of earnings surprises, with an average surprise of 29.33% over the last four quarters [2][4]. - The company's shares are trading at 13.43X forward 12-month earnings, which is lower than the industry average of 13.98X and peers like JPMorgan and Morgan Stanley [19][21]. - The company is scaling back its consumer banking footprint to focus on trading and investment banking, which have shown strong results [22]. Group 4: Shareholder Returns and Future Outlook - Goldman increased its common stock dividend by 9.1% to $3 per share in July 2024, with a historical annualized growth rate of 24.53% over the past five years [25]. - The company plans to expand its private credit portfolio to $300 billion in five years, positioning itself for long-term growth [23]. - Overall, improving client activities, a favorable lending scenario, and solid capital markets businesses suggest a positive outlook for Goldman Sachs [26].