Goldman Sachs Trounces Earnings Estimates

On Tuesday morning, Goldman Sachs (GS) reported earnings that were much better than expected. The firm beat consensus estimates by a whopping +34%.

To me, this highlights both the inability of analysts to accurately predict earnings for the brokers, and the fact that most of the Street continues to underestimate the execution at GS.

Here are some of the highlights from the quarter:

Goldman ranked first in M&A ytd.

Equity underwriting rose +72% to its highest level in eight years.

Assets under management rose +18% to a record $895 billion.

Book value rose +5% to $97.49; ROTE was 23.5% for Q2.

Investment Banking revenues fell -2% to $1.69 billion.

Financial Advisory revenues rose +13% to $800 million.

FICC revenues were -29% lower to $2.38 billion.

Net revenues in Equities was flat at $2.49 billion.

Trading and Principal Investments overall was -16% lower ($5.59 billion).

Securities Services rose +30% to $985 million due to strength in Prime Brokerage.

Comp and Benefits was -7% lower. Its comp ratio was flat at 48%.

Ave. daily VaR increased to $184 million.

Mgt. repurchased 1.2 million shares (ave. price $173.85).

The stock already ran some +13% in the days ahead of its earnings announcement. There is a bit of a 'buy the rumor, sell the news' reaction going on. However, this report gives me further confidence in management, and I will not look to use any further increase to add to my positions.

Disclosure:  The author is long GS.