Global investment banking leader and Dow-30 member Goldman Sachs (GS - Free Goldman Sachs Stock Report) reported first-quarter revenue and share-net results that were above our estimates, showing strong year-over-year improvement.
Revenues of $10.256 billion were slightly above our earlier call of $10 billion, but marked a noteworthy increase over the $7.803 billion figure in the prior-year period. Meanwhile, earnings per share of $5.15 were solidly above our forecast of $4.00 and a hefty advance over the $2.68 sum posted in the first quarter of last year.
The Investment Banking segment led the way, growing 16% from the prior-year period figure on a 37% surge in underwriting revenues. Equity underwriting revenues were significantly higher as well, thanks to an increase in industry-wide activity, while debt underwriting expansion was driven by a boost in leveraged finance activity. Meanwhile, the Investing & Lending segment generated revenues of $666 million from debt securities and loans, which was its strongest quarterly performance in nearly four years.
Despite growth in revenues and earnings, GS shares declined by over 4% after a release of the results. Many investors had expected greater growth than we had estimated, and some took weak trading revenues as an ominous sign. Indeed, trading revenues declined even as some of Goldman's competitors have recently reported gains. Furthermore, the stock was optimistically priced after a surge in the final two months of 2016, with last year's election results fueling speculation that the company would face a more-favorable regulatory environment in the coming years.
All told, we think Goldman Sachs is on track to meet our full-year 2017 estimates for revenues of $43 billion and share net of $19.95.
About The Company: The Goldman Sachs Group is a global investment banking and securities firm. It operates in four business segments: Investment Banking (21% of 2016 revenues); Institutional Client Services (47%); Investing & Lending (13%); and Investment Management (19%). In 2016, 40% of the company’s revenues came from outside of the Americas.
