Please ensure Javascript is enabled for purposes of website accessibility

Here's Why Goldman Sachs Is Soaring Today

By Matthew Frankel, CFP® - Updated Apr 19, 2019 at 5:47PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The bank's latest results impressed investors in a few different ways.

What happened

Goldman Sachs (GS 1.08%) reported its fourth-quarter and year-end 2018 earnings on Wednesday, and it's fair to say that investors were quite pleased with the results. Banks are generally not too volatile after earnings reports, but Goldman's stock was up by more than 7% as of 11:30 a.m. EST today.

So what

The primary reason Goldman's stock is rocketing higher is that the bank beat expectations on both the top and bottom lines. Revenue of $8.08 billion was more than $500 million greater than analysts had expected, and earnings of $6.04 per share beat estimates by 36%.

Two businesspeople looking at stock chart on computer screen.

Image source: Getty Images.

There were a couple of particularly impressive numbers investors should know. First, investment banking revenue was ahead of estimates, and advisory revenue surged 56% from a year ago. Second, the investing and lending division, which includes the young and fast-growing Marcus consumer banking business, shattered expectations with $1.91 billion in revenue, versus the $1.35 billion that was expected.

Now what

Goldman Sachs has been one of the worst-performing bank stocks in recent history, thanks to the 1MDB bond fund scandal and the uncertainty that comes with it. While CEO David Solomon can't discuss it in too much detail, he briefly addressed the scandal on Goldman's conference call, and it appears that investors are pleased with what he had to say.

However, the 1MDB scandal is still a big question mark for investors and is likely to continue to be. Malaysia is trying to recoup $7.5 billion from Goldman, and the U.S. Justice Department has launched its own investigation. So, although the earnings results were stellar and today's pop is undoubtedly making investors happy, Goldman's stock valuation will likely be depressed until some closure occurs.

Check out the latest Goldman Sachs earnings call transcript.

Matthew Frankel, CFP has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

The Goldman Sachs Group, Inc. Stock Quote
The Goldman Sachs Group, Inc.
GS
$351.68 (1.08%) $3.77

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
390%
 
S&P 500 Returns
125%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 08/11/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.