Goldman Sachs shares gain the most in 118 months on Wednesday, fourth-quarter results top estimates supported by strength in financial advisory, equity trading

January 17, 2019 11:17 am

Goldman Sachs Group Inc’s (GS) fourth-quarter revenue, reported on Wednesday, exceeded Wall Street estimates, since strong results in equities trading as well as in merger and acquisition (M&A) advisory mitigated a drop in bond trading revenue.

Goldman Sachs shares closed higher for a fourth consecutive trading session in New York on Wednesday. It has also been the sharpest daily surge since March 23rd 2009. The stock went up 9.54% ($17.17) to $197.08, after touching an intraday high at $198.06, or a price level not seen since November 28th ($198.45).

Shares of Goldman Sachs Group Inc have risen 17.98% so far in 2019 compared with a 4.36% gain for the benchmark index, S&P 500 (SPX).

In 2018, Goldman Sachs’s stock retreated 34.43%, thus, it underperformed the S&P 500, which registered a 6.24% loss.

Goldman’s revenue, net of interest expense, was reported at $8.08 billion during the fourth quarter, essentially unchanged compared to the same period of 2017. The figure compares with a median analyst estimate of $7.55 billion.

The bank’s total trading revenue, unlike other rivals on Wall Street, went up 2% year-on-year to $2.43 billion during the quarter ended on December 31st. Revenue from equities trading surged 17% year-on-year to $1.60 billion, while revenue from bond trading shrank 18% year-on-year to $822 million.

At the same time, revenue from Goldman’s investment banking business dropped 5% year-on-year to $2.04 billion during the fourth quarter, since revenue from equity and debt underwriting plummeted 38%.

On the other hand, revenue from the bank’s financial advisory business registered a 56% annual growth to $1.20 billion during the latest quarter, which reflected a surge in industry-wide completed mergers and acquisitions volumes.

Meanwhile, net income attributable to shareholders was reported at $2.32 billion (or $6.04 per share) during the quarter ended on December 31st, which compares with a loss of $2.14 billion (or $5.51 per share) in the year-ago period when Goldman took a significant one-time charge associated with the US tax code reform.

In comparison, analysts on average had expected earnings of $4.45 per share.

“We are pleased with our performance for the year, achieving stronger top and bottom line results despite a challenging backdrop for our market-making businesses in the second half,” Goldman’s Chief Executive Officer David Solomon said in a statement, cited by CNBC.

“We are confident that we are well positioned to support an even larger universe of clients, continue to diversify our revenue mix and deliver strong returns for our shareholders in the years ahead,” he added.

According to CNN Money, the 26 analysts, offering 12-month forecasts regarding Goldman Sachs’s stock price, have a median target of $246.00, with a high estimate of $295.00 and a low estimate of $203.00. The median estimate represents a 24.82% upside compared to the closing price of $197.08 on January 16th.

The same media also reported that 16 out of 29 surveyed investment analysts had rated Goldman Sachs’s stock as “Hold”, while 10 – as “Buy”.

Weekly Pivot Levels

By using the traditional method of calculation, the weekly levels of importance for Goldman Sachs Group Inc (GS) are presented as follows:

Central Pivot Point – $175.77
R1 – $179.26
R2 – $181.60
R3 – $185.09
R4 – $188.59

S1 – $173.43
S2 – $169.94
S3 – $167.60
S4 – $165.27

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