Capping the most profitable year on record for a Wall Street investment firm, Goldman Sachs reported a 93% increase in profits during its recently ended 4th quarter. By the numbers, Goldman's net income advanced to $3.15 billion, or $6.59 a share, up from $1.63 billion, or $3.35, during the year earlier period, surpassing the average Bloomberg estimate of EPS of just $6.17. Goldman also outperformed Thomson Financial consensus estimates which were for EPS of $6.04 on revenue of $8.96 billion. For the quarter, revenue increased by a much more moderate 47% - to $9.41 billion from $6.4 billion a year earlier. Profit increases surpassed revenue increases as a result of bigger investments in leveraged buyouts and smaller payouts in compensation. Return on equity was 41.5% for the quarter and 32.8% for the FY2006. Goldman shares are up more than 58 percent this year - the company's best year since going public in 1999 - on its best earning results ever: net earnings of $9.54 billion, or $19.69 a share, on revenue of $37.67 billion. Lehman Brothers, Bear Stearns and Morgan Stanley are all set to report over the next few days.
• Sources: Conference call transcripts: Goldman Sachs F4Q06 (Qtr End 11/24/06). Media: Bloomberg, MarketWatch, Reuters
• Related commentary: Brokerage Analysts Foresee Dismal 2007 Results, Exchange Traded Credit Derivatives Likely to Hurt Investment Bank Earnings, Streaking Stocks: Goldman Sachs Up 12 Days in a Row, Investment Banks Have Too Much Money On Their Hands
• Potentially impacted stocks and ETFs: Goldman Sachs (NYSE:GS). Competitors: The Bear Stearns Companies Inc. (NYSE:BSC), Morgan Stanley (NYSE:MS), Lehman Brothers (LEH), Merrill Lynch (MER), UBS AG (NYSE:UBS), Deutsche Bank (NYSE:DB), Credit Suisse Group (NYSE:CS). ETFs: iShares Dow Jones US Broker-Dealers Ind. (NYSEARCA:IAI), Vanguard Financials (NYSEARCA:VFH), Financial Select Sector SPDR (NYSEARCA:XLF), iShares Dow Jones US Financial Svc. (NYSEARCA:IYG)
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