On Nov 19, 2014, we issued an updated research report on The Goldman Sachs Group, Inc. (NYSE: GS). Shares of this New York-based investment manager have recorded a year-to-date return of 7.8%. Further, Goldman has outpaced the Zacks Consensus Estimate in the last four quarters, with an average beat of 25.95%.
We believe this growth story has been aided by the company's continued focus on expense management and revenue growth apart from several other positives including a strong capital position, steady capital deployment activities and business diversification.
Organic growth remains a key strength at Goldman, as reflected in its revenue growth. Revenues jumped 5.6% year over year in the first nine months of 2014, after reflecting a CAGR of 9% over the last three years (2011–2013). We believe the company is well positioned to maintain this trend going forward.
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Though Goldman's operating expenses increased slightly year over year for the nine months ended Sep 2014, continuation of expense management will aid top-line expansion in the coming quarters. Reflecting the company's successful expense reduction initiatives, total operating expenses declined 14.5% in 2013 as compared with the level of 2010 (before the launch of comprehensive expense initiative). This resulted in a 140 basis points rise in pretax margin in 2013, the highest level in the last four years.
In the first nine months of 2014, the company paid $779 million as common stock dividends, along with the repurchase of common stock worth $4.2 billion. Such a shareholder-friendly approach is expected to act as a catalyst for the stock.
Analysts' bullish stance on the stock was reflected in the estimate revisions over the past 60 days. For 2014, the Zacks Consensus Estimate advanced 5.6% to $17.64 per share. It moved up 1.7% to $17.60 per share for 2015. Hence, Goldman currently carries a Zacks Rank #2 (Buy).
Key Picks from the Sector
Other stocks in the same sector worth considering include FXCM Inc. (NYSE: FXCM) and Piper Jaffray Companies (NYSE: PJC) with a Zacks Rank #1 (Strong Buy), while Evercore Partners Inc. (NYSE: EVR) carries a Zacks Rank #2 (Buy).
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GOLDMAN SACHS (NYSE: GS): Free Stock Analysis Report
FXCM INC-A (NYSE:
PIPER JAFFRAY (NYSE: PJC): Free Stock Analysis Report
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