Goldman Sachs To Edge Past the Consensus In Q1

GS: Goldman Sachs logo
Goldman Sachs

Goldman Sachs (NYSE: GS) is scheduled to report its fiscal Q1 2023 results on Tuesday, April 18, 2023. We expect Goldman Sachs to edge past the consensus estimates of revenues and earnings. The investment bank underperformed expectations in the last quarter, with revenues decreasing by 16% y-o-y to $10.59 billion. The top line mainly suffered due to a 48% decline in investment banking and a 27% drop in the asset & wealth management units. That said, the impact was partially offset by growth in platform solutions and FICC (fixed income, currency, & commodity) trading segments. We expect the asset & wealth management and platform solutions divisions to drive Q1 results. Overall, first-quarter revenues are likely to improve on a year-on-year basis.

We estimate Goldman Sachs’ valuation to be around $396 per share which is 22% above the current market price of $325. Our interactive dashboard analysis on Goldman Sachs’ Earnings Preview has more details.

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(1) Revenues expected to top the consensus estimates

Goldman Sachs’ revenues fell by 20% y-o-y to $47.37 billion in FY2022.

  • The bank generated close to 25% of total revenues from investment banking in 2021, which decreased to 14% in 2022. It was due to a significant drop in the underwriting revenues. We expect the first quarter results to be on similar lines.
  • The global markets unit contributed 38% of the total revenues in 2021, which increased to 54% in 2022. It was primarily due to higher FICC trading revenues. We expect the trend to continue in Q1.
  • The asset & wealth management division posted a drop of 38% in 2022, due to lower income from equity and debt investments. We expect the business to see some improvement in Q1.
  • Overall, we forecast Goldman Sachs’s revenues to touch $50.2 billion for the full-year 2023.

Trefis estimates Goldman Sachs’s fiscal Q1 2023 revenues to be around $13.26 billion, 2% above the $13.05 billion consensus estimate. 

2) EPS to edge past the expected mark

Goldman Sachs Q1 2023 adjusted earnings per share (EPS) is expected to be $8.71 per Trefis analysis, marginally above the consensus estimate of $8.60. The bank’s adjusted net income declined by 49% y-o-y to $10.76 billion in 2022. It was partly due to lower revenues, and partly because of higher expense figures. The expense figure swelled due to an unfavorable build-up in the provisions for credit losses from $357 million to $2.7 billion, and higher operating expenses as a % of revenues. We expect the Q1 results to be on similar lines. Overall, Goldman Sachs is likely to report an annual EPS of $34.22 for the full-year 2023.

(3) Stock price estimate is 22% higher than the current market price

We arrive at Goldman Sachs’ valuation, using an EPS estimate of around $ 34.22 and a P/E multiple of just below 12x in fiscal 2023. This translates into a price of $396, which is 22% above the current market price of around $325. 

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 

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 Apr 2023
MTD [1]
YTD [1]
Total [2]
 GS Return -1% -5% 36%
 S&P 500 Return 0% 7% 84%
 Trefis Multi-Strategy Portfolio -1% 7% 235%

[1] Month-to-date and year-to-date as of 4/11/2023
[2] Cumulative total returns since the end of 2016

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