ZACKSยท2025-08-29 18:06Core Insights - Goldman Sachs Group Inc. (GS) and Evercore Inc. (EVR) are prominent U.S. investment banks competing in M&A advisory and dealmaking, with Goldman representing a bulge-bracket bank and Evercore a boutique advisory firm [1] Market Sentiment and M&A Outlook - Market sentiment dipped briefly in early 2025 due to Trump's tariff plans, but M&A activity has regained momentum and is expected to remain strong in the latter half of 2025, driven by better stock valuations, pent-up demand, and corporate consolidation efforts [2] - Regulatory changes under the Trump administration, including looser requirements from the Federal Reserve, are creating favorable conditions for consolidation [2] Goldman Sachs (GS) Analysis - Goldman maintains a leadership position in global M&A, with investment banking revenues increasing by 8% year-over-year in the first half of 2025, supported by a strong deal pipeline and backlog [3] - The company is exiting its non-core consumer banking business to focus on Global Banking and Markets and Asset and Wealth Management (AWM), which is seen as a more stable revenue source [4] - Goldman is exploring acquisitions to expand its AWM footprint, emphasizing the importance of scale in growth [5] Evercore (EVR) Analysis - Evercore generates 94% of its revenues from Investment Banking and Equities, with a compound annual growth rate (CAGR) of 8.6% from 2017 to 2024, continuing to show growth in the first half of 2025 [6] - The company is actively increasing its staff to strengthen its IB business, with 197 senior managing directors as of June 30, 2025, and aims to diversify revenue sources and expand geographically [6] Price Performance and Valuation - Year-to-date, shares of Goldman and Evercore have risen by 31.7% and 17.1%, respectively, compared to the industry growth of 26.8% [7] - Goldman is trading at a 12-month forward P/E of 14.99X, above its five-year median of 10.24X, while Evercore trades at a P/E of 19.64X, above its five-year median of 12.49X [11] - Goldman offers a higher dividend yield of 1.60% compared to Evercore's 1.03%, both exceeding the industry average of 1% [14] Earnings Estimates - The Zacks Consensus Estimate for GS's revenues in 2025 and 2026 suggests year-over-year increases of 6.3% and 6.5%, with earnings expected to rise by 12.6% and 14.9% respectively [17] - For Evercore, the estimates indicate revenue growth of 15.9% and 27.1% for 2025 and 2026, with earnings expected to jump by 31.7% and 50.8% respectively [20] Investment Considerations - Goldman is strategically positioned with a diversified model and a focus on AWM, providing stability and resilience, while Evercore shows strong earnings momentum but carries a high valuation premium and narrower revenue base [23][24] - For long-term investment in the IB sector, Goldman is viewed as the more favorable option due to its balanced approach and solid growth prospects [24]