Investment banking giant Goldman Sachs (NYSE:GS) just reported its second-quarter results and appears to be an early winner of earnings season. Not only did Goldman surpass expectations on both the top and bottom lines, but there was a lot for investors to cheer about elsewhere in the report.
With that in mind, here's a rundown of the headline numbers, as well as some of the important details investors should know about Goldman Sachs' second quarter.
Revenue and earnings look strong
While you can't really get a feel for how any company is doing simply by looking at the headline revenue and earnings numbers, it's important to note that Goldman Sachs delivered big positive surprises in both areas.
During the second quarter, Goldman Sachs generated $9.46 billion in revenue, handily surpassing the $8.83 billion Wall Street had been looking for. And on the earnings side, the bank's $5.81 per share came in nearly a full dollar ahead of the $4.89 consensus estimate.
Little cause for disappointment
- Unlike Citigroup and JPMorgan Chase, both of which have already reported their results, Goldman Sachs beat expectations for equities trading revenue, posting $2.01 billion -- over $200 million more than had been projected.
- Investment banking revenue also was a pleasant surprise. The company generated $1.86 billion in investment banking revenue for the second quarter. Equity underwriting rose by a staggering 78% from Q1, thanks to the active IPO market in the second quarter of the year.
- Goldman's profitability remains strong, with a 11.1% return on equity (ROE).
- Goldman Sachs' rapidly growing consumer banking business continues to add to revenue. The investing and lending segment, which includes the Marcus consumer banking platform, produced 16% higher revenue than a year ago.
- In the wealth management division, assets under supervision increased to a company record $1.66 trillion, including $29 billion of net inflows.
- While it isn't new information, Goldman Sachs is increasing its dividend to $1.25 per share from $0.85 and plans to purchase up to $7 billion in stock over the next year -- about 9% of its total outstanding shares.
- Operating expenses through the first half of 2019 were 6% lower than at this point last year.
To be sure, the report wasn't perfect. For example, although it has record assets under supervision, the wealth management segment actually brought in lower revenue than a year ago. And while equity underwriting revenue was strong, the other areas of investment banking (debt underwriting and advisory revenue) declined.
However, the point is that there's far more good news than bad in Goldman's earnings report, which is why the stock is rising in response.
Strong results and more potential growth drivers ahead
As you can see, it's tough to find anything to be disappointed about in Goldman's second quarter. Not only that, but it's worth pointing out that there are some potential positive catalysts that could boost earnings and revenue even further this year. For one thing, Goldman's co-branded Apple credit card was announced in March and is set to be rolled out. And the bank's 1MDB Malaysian investment fund scandal is still unresolved, so eliminating this uncertainty could be a big boost.
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