Global investment banking leader Goldman Sachs (GS – Free Goldman Sachs Stock Report) reported second-quarter revenue and share-net results that were above our estimates, showing strong year-over-year improvement.
Revenues of $13.320 billion were considerably higher than our earlier call of $11.0 billion, as well as marking a noteworthy increase over the $10.319 billion figure that the company posted in the previous-year period. Meantime, share net came in at $5.98 for the June period, which was significantly ahead of our estimate of $5.00, as well as the $3.95 tally that was recorded in the second quarter of last year.
Strong year-over-year growth was consistent across Goldman's major business segments. Net revenues in the Investment Banking segment were 18% higher than the second quarter of 2017. This improvement was driven by an increase in completed mergers and acquisitions volumes, as well as increased revenues from initial public offerings. Meanwhile, the Institutional Client Services segment delivered 17% revenue growth over the previous-year period. The division received a boost from higher activity in commodities, interest rate products, and credit products. Concurrently, the Investing & Lending segment delivered 23% revenue growth, driven by net gains from private equities, as well as significantly higher net interest income. Finally, revenues in the Investment Management segment were 20% higher than the second quarter of 2017, primarily due to significantly higher incentive fees.
Coinciding with Goldman's second-quarter earnings release, the company announced that it intends to replace its longtime Chairman and CEO Lloyd Blankfein with the firm's President and COO David M. Solomon beginning in October.
In light of Goldman's strong results, we have raised our revenues and share-net estimates for 2018 and 2019. Whereas we previously foresaw 2018 revenues of $48 billion, we now predict they will come in at $51 billion, and for 2019 we have raised our outlook to $52 billion, from $49 billion previously. Meanwhile, we have increased our earnings-per-share estimate for 2018 from $24.00 to $25.00, and for 2019 from $26.00 to $27.00.
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.
- Adam James Platt
