Goldman Sachs (GS) Cranks Up Comp-Destroying Machine

·3-min read

Wednesday, April 14, 2021

That near-unicorn of equity rating — the Zacks Rank #1 (Strong Buy) with a Value-Growth-Momentum score of A — is well-represented as we kick off Q1 earnings season this morning, with Goldman Sachs GS stomping expectations on both its top and bottom lines: $18.60 per share nearly doubled the $9.79 in the Zacks consensus, and a whopping 510% gain year over year. Revenues of $17.70 billion grew 102% year over year and +51% sequentially, leaving in the dust the $11.97 billion estimate.

This may be the beginning of the comp-destroying machine soon to be on display throughout the land as 2021 moves forward. Year-ago numbers as the pandemic was descending on the U.S. economy will be easily toppled even by the less fiscally sound corporations; in Goldman’s case, it represents the gleam on the superior equity. Fixed Income and Investment Banking came in hotter than expected, but Equities grew to $3.7 billion from $2.4 billion expected, with Asset Management $4.6 billion versus $2.3 billion estimate.

JPMorgan Chase JPM, while no Goldman Sachs in its Q1 performance, nevertheless provided a sound thrashing to estimates: $4.50 per share amounts to a 47.5% earnings surprise from the consensus $3.05, and improves on the year-ago 78 cents per share by nearly six-fold. Revenues of $33.12 billion outpaced the $30.07 billion expected for a 7.3% surprise on a 47% gain in its Equities segment. For more on JPM's earnings, click here.

Even Wells Fargo WFC, climbing out of its deep hole from several quarters ago now, posted strong top- and bottom-line beats in its Q1 release before today’s opening bell: $1.05 per share topped the 69 cents expected on a 28-cent boost to credit losses, on $18.06 billion in quarterly revenues, swinging to a positive year-over-year gain from estimates of $17.62 billion. Wells, which has posted earnings misses eight times over the past five years, saw a big boost from its Wealth & Investment segment.

While this may be the start of eye-popping earnings and revenue beats as Q1 reporting season advances, in some ways we’re leading with the cream of the crop: savings rates among households trapped indoors much of the past year are a multi-year highs, with the biggest Wall Street banks the biggest beneficiaries. Then again, Q1 represents just the tip of the iceberg. If you think these blowout Q1 numbers are amazing, just wait until Q2.

Later today, likely this afternoon, Coinbase (COIN) — the largest U.S. exchange for cryptocurrencies — will be going public on the Nasdaq via direct listing. The burgeoning platform for Bitcoin, Ethereum, etc. is expected to trade with fairly heavy volatility, but if you are among those who feel crypto trading remains in its nascent stages, it’s hard to get more “ground floor” than this here, today. As analyst release coverage of COIN, Zacks Investment Research will provide ratings and coverage.

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