Goldman Sachs Blows Out Earnings and Raises Dividend

Banking, finance, and taxes

Published: October 16, 2014 8:45 am

Goldman Sachs Group Inc. (NYSE: GS) reported its third-quarter earnings before the market opened Thursday and the number was handily above estimates. Goldman Sachs reported $4.57 in earnings per share and $8.39 billion in revenue, against Thomson Reuters consensus estimates of $3.21 in earnings per share and $7.85 billion in revenue. The third quarter from the previous year had earnings of $2.88 per share and $6.72 billion in revenue.

Goldman Sachs even raised its dividend to $0.60 per share from a prior $0.55. That dividend hike was within the range of our expectations when we predicted six more DJIA dividend hikes, but it is on the lower side of that range.

Goldman Sachs is set to pursue a new fund with high conviction equity investment ideas, using a bottom-up approach while seeking to hedge market risk and limit volatility. GSAM’s Liquid Alternatives business has now expanded that platform to include seven funds, which seems to be more evidence that the group has selectively gone after broader classes of investors.

The company did not give guidance for the fourth quarter. Thomson Reuters has fourth-quarter consensus estimates for earnings of $5.39 per share and $8.40 billion in revenue.

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Over the course of the third quarter, shares moved up almost 10% to close the quarter at $183.57 from its open of $166.92. The range on the quarter was $161.53 to $189.50. However, in the days before the earnings were released, stock prices hit a 52-week high but quickly fell from that level to close Wednesday at $177.24.

Book value per common share was $161.38. The brokerage giant now claims $1.15 trillion in assets under its supervision, along with a headcount of 33,500. The firm’s Basel 3 Tier 1 common equity ratio was 11.8%.

Goldman Sachs has also seen its compensation and benefits ratio come down to 40% of net revenues, but that is during the first nine months.

The premarket reaction to earnings might have been different on a normal trading day, but the tank in equity futures is weighing on even the good earnings reports. Shares were down roughly 2.5% to $177.24 with more than an hour to go before the open.

Goldman Sachs has a consensus analyst price target of $182.23 and a 52-week trading range of $151.65 to $189.50. It has a market cap of $81 billion.

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