Jefferies reaffirms Buy on Goldman Sachs stock after strong Q1 earnings beat

Jefferies reaffirms Buy on Goldman Sachs stock after strong Q1 earnings beat
Credit: © Reuters.

On Monday, Jefferies maintained a positive outlook on Goldman Sachs (NYSE: GS ) stock, reaffirming a Buy rating with a steadfast price target of $471.00.

The financial institution's first-quarter earnings per share (EPS) reached $11.58, significantly surpassing the consensus estimate of $8.49. This performance was attributed to robust activity across Global Banking & Markets (GB&M), with total revenues exceeding expectations by $1.3 billion.

The substantial earnings beat was primarily driven by Fixed Income, Currencies, and Commodities (FICC) and equities, which outperformed consensus predictions by $750 million and $290 million, respectively. This success was further bolstered by record financing activity. Despite a quarter-over-quarter decrease in the investment banking (IB) backlog, mainly within advisory services, the results were strong.

Goldman Sachs' efficiency ratio for the quarter was reported at 60.9%, which is slightly above the long-term target of 60%. This figure represents the firm's expenses as a percentage of revenue, indicating how well the company is managing its costs relative to its income.

The company also exceeded expectations in terms of capital return, executing $1.5 billion in share buybacks compared to the anticipated $1.1 billion. This move signals confidence in the firm's financial health and a commitment to delivering value to shareholders.

Lastly, the report highlighted Goldman Sachs' return on tangible common equity (ROTCE), which stands at approximately 16%, juxtaposed with a price to tangible book value (P/TBV) of 1.3 times. This metric is crucial as it measures the profitability relative to the equity held by common shareholders, excluding intangible assets.

InvestingPro Insights

Goldman Sachs (NYSE:GS) has demonstrated a robust financial performance, and insights from InvestingPro further illuminate the company's standing. With a market capitalization of $139.77 billion and a forward P/E ratio of 15.49, Goldman Sachs presents a compelling valuation relative to its earnings. The company's commitment to shareholder value is evident through an aggressive share buyback strategy and a consistent increase in dividends, which have grown for 12 consecutive years, showcasing a stable and growing income stream for investors.

InvestingPro Tips highlight that the company has not only been profitable over the last twelve months but also expects to maintain profitability this year. Additionally, analysts at InvestingPro have identified Goldman Sachs as a prominent player in the Capital Markets industry, which is supported by a strong return over the last five years and a significant price uptick over the last six months. For those seeking to delve deeper into the financial intricacies of Goldman Sachs, InvestingPro offers additional tips and metrics that can be accessed using the coupon code PRONEWS24 for an extra 10% off a yearly or biyearly Pro and Pro+ subscription.

Moreover, the company's liquid assets surpass its short-term obligations, indicating a healthy liquidity position. With a dividend yield of 2.68% and a recent dividend growth of 10.0%, Goldman Sachs continues to reward its shareholders. The company's next earnings date is set for April 15, 2024, which investors will be watching closely. For those interested, there are 9 additional InvestingPro Tips available that provide deeper analysis and perspectives on Goldman Sachs' performance and outlook.

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