On Tuesday, Evercore ISI adjusted its outlook on Goldman Sachs (NYSE:GS) shares, increasing the price target to $520 from the prior target of $475, while reaffirming an Outperform rating on the stock.
The firm's analysis followed Goldman Sachs' second-quarter earnings release, which reported an earnings per share (EPS) of $8.62, or $8.41 excluding certain items. This performance was compared to Evercore ISI's and the consensus estimate of $8.58 and $8.35, respectively.
The earnings call provided several key positive highlights, including an optimistic forecast for investment banking (IB) activity with a notable quarter-over-quarter increase in the backlog and client demand for committed financing.
Additionally, Goldman Sachs announced a larger-than-anticipated stock buyback program, although management indicated that the pace in the third quarter would likely slow down compared to the second quarter.
Evercore ISI also underscored the impressive alternative fundraising achieved by Goldman Sachs, totaling $22 billion in the second quarter and $36 billion year-to-date.
There are now expectations for $50 billion in gross alternative capital to be raised for the full year of 2024. Furthermore, the firm is on track with its plan to reduce its HPI exposures, having decreased it by $2.2 billion with a target of $12.9 billion to go by the end of 2026.
The analysis concluded that, despite some concerns such as higher compensation costs, modest drags in Platform Solutions & Transaction Banking, and a lagging return on equity in Asset & Wealth Management and Goldman Sachs overall, the quarter was mostly in line with expectations.
The positive factors were driven by better fixed income, currencies, and commodities (FICC) results, strong asset flows, a lower credit provision, and better non-compensation expenses.
Looking ahead, Evercore ISI suggested that Goldman Sachs is well-positioned to benefit from the anticipated uptick in investment banking and sponsor-related activities, as these sectors are currently performing below historical averages.
The firm anticipates that the investment bank's strong presence in banking, markets, and private markets will enable it to capitalize on the expected reacceleration in these areas.
InvestingPro Insights
Goldman Sachs (NYSE:GS) has demonstrated a robust performance recently, as reflected in the real-time data from InvestingPro. With a market capitalization of $167.25 billion and a forward-looking P/E ratio as of Q2 2024 standing at 14.19, the company showcases its financial stability and investor confidence. Moreover, the impressive revenue growth of 21.1% in Q2 2024 indicates a strong upward trajectory for the company's financials. Notably, Goldman Sachs has a high gross profit margin of 83.64% for the last twelve months as of Q2 2024, underlining its efficiency in generating income relative to its revenue.
On the strategic front, two InvestingPro Tips particularly stand out. Firstly, Goldman Sachs is a prominent player in the Capital Markets industry, which aligns with Evercore ISI's positive outlook on the firm's investment banking prospects. Secondly, the company's ability to maintain dividend payments for 26 consecutive years is a testament to its financial resilience and commitment to shareholder returns. This consistency is further supported by the company's dividend growth of 10% over the last year. Additionally, for investors seeking more in-depth analysis, there are 15 more InvestingPro Tips available, which can be accessed with the use of coupon code PRONEWS24 for up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription.
Goldman Sachs' strategic initiatives and solid financial metrics position it as a key player to watch in the evolving financial landscape. With a strong foundation and positive market sentiment, the company is set to navigate the future with confidence.
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