Goldman Sachs Stock To Beat The Consensus In Q2?

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Trefis
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Goldman Sachs

Goldman Sachs (NYSE: GS) is scheduled to report its fiscal Q2 2022 results on Monday, July 18, 2022. We expect Goldman Sachs to beat the consensus estimates of revenues and earnings. The investment bank posted better than expected results in the last quarter, despite a 27% y-o-y decrease in the top-line. This was driven by a significant drop in asset management revenues, followed by negative growth in the investment banking business. On the flip side, the global markets and consumer & wealth management segments reported higher revenues. We expect the same trend to continue in the second quarter.  

We estimate Goldman Sachs’ valuation to be around $392 per share which is 34% above the current market price of $293. Our interactive dashboard analysis on Goldman Sachs’ Earnings Preview has more details. 

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(1) Revenues expected to beat the consensus estimates

Goldman Sachs’ revenues grew 33% y-o-y in 2021 to $59.3 billion. It was mainly driven by a 58% jump in investment banking, followed by an 87% rise in asset management, and a 25% growth in consumer & wealth management units.

  • The bank generated close to 25% of total revenues from investment banking in 2021. The segment witnessed strong growth in the year due to upbeat underwriting and M&A activity. However, the unit posted a 36% y-o-y decrease in the first quarter of 2022. It was mainly due to lower underwriting income. We expect the second-quarter results to be on similar lines.
  • The global markets’ revenues grew 4% y-o-y in 2021. It was due to lower FICC (fixed income, currency, and commodity) trading revenues, which partially counterbalanced the growth in the equity trading stream. Further, the segment saw similar growth in the first quarter of 2022. However this time, it was because of growth in the FICC trading. We expect the global markets unit to continue its current momentum in the second quarter, too.
  • The asset management grew 87% in 2021 due to growth in equity investments and lending & debt investment income. However, the segment revenues dropped 88% y-o-y in the first quarter of 2022. We expect it to follow the same pattern in the second quarter.
  • Overall, we expect Goldman Sachs’s revenues to touch $48.4 billion for full-year 2022.

Trefis estimates Goldman Sachs’s fiscal Q2 2022 revenues to be around $11.53 billion, 5% above the $10.94 billion consensus estimate. We expect the consumer & wealth management and global markets to drive second-quarter results.

2) EPS is likely to beat the consensus estimates

Goldman Sachs Q2 2022 adjusted earnings per share (EPS) is expected to be $8.06 per Trefis analysis, almost 11% above the consensus estimate of $7.25. The bank had a strong run in 2021, with its adjusted net income increasing by 137% y-o-y to $21.2 billion. It was partly due to growth in the top line and partly due to a favorable decrease in the provisions for credit losses. That said, the trend changed in the first quarter of 2022, with the firm posting a 43% y-o-y drop in the adjusted net income to $3.8 billion. The decline was because of lower revenues and higher provisions figures. We expect the same pattern to continue in the second quarter. Overall, Goldman Sachs is likely to report an annual EPS of $38.67 for the full year of 2022.

(3) Stock price estimate 34% higher than the current market price

We arrive at Goldman Sachs’ valuation, using an EPS estimate of around $38.67 and a P/E multiple of just above 10x in fiscal 2022. This translates into a price of $392, which is 34% above the current market price of around $293. 

Note: P/E Multiples are based on Share Price at the end of the year and reported (or expected) Adjusted Earnings for the full year 

With inflation rising and the Fed raising interest rates, Goldman Sachs has fallen 24% this year. Can it drop more? See how low can Goldman Sachs stock go by comparing its decline in previous market crashes. Here is a performance summary of all stocks in previous market crashes.

What if you’re looking for a more balanced portfolio instead? Our high-quality portfolio and multi-strategy portfolio have beaten the market consistently since the end of 2016.

 Returns Jul 2022
MTD [1]
2022
YTD [1]
2017-22
Total [2]
 GS Return -2% -24% 22%
 S&P 500 Return 1% -20% 71%
 Trefis Multi-Strategy Portfolio 3% -21% 211%

[1] Month-to-date and year-to-date as of 7/13/2022
[2] Cumulative total returns since the end of 2016

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