On Wednesday, JPMorgan (NYSE:JPM) reiterated its Overweight rating and $550.00 price target for Goldman Sachs (NYSE:NYSE:GS), now valued at $188.16 billion by market cap, following the bank's robust fourth-quarter earnings. According to InvestingPro data, analysts maintain a positive outlook with a consensus target range of $450-$736, suggesting further upside potential.
As a prominent player in the Capital Markets industry, Goldman Sachs has demonstrated remarkable strength with a 55% return over the past year. The bank's revenue saw substantial gains across its core businesses of Global Banking and Markets (GBM) and Asset & Wealth Management (AWM), with a particularly commendable cost-to-income (C/I) ratio of 59.6% for the quarter, which brought the full-year 2024 C/I ratio to 63%.
Goldman Sachs reported a fourth-quarter diluted earnings per share (EPS) of $11.95, which is a significant 46% higher than the Bloomberg consensus estimate of $8.2. The reported annualized return on tangible equity (RoTE) for the quarter stood at 15.5%, contributing to a full-year RoTE of 13.5% and a return on equity (ROE) of 12.7%.
Trading at a P/E ratio of 16.5x and showing strong revenue growth of 12% in the last twelve months, the stock appears slightly undervalued according to InvestingPro's Fair Value analysis. These figures indicate that Goldman Sachs is on a solid trajectory to achieve its target of mid-teens ROE over the cycle.
The firm's Equity Sales & Trading (S&T) revenues reached $3.45 billion, a 32% increase year-over-year, outperforming many peers and contributing to a full-year growth of 16%. Fixed Income, Currencies, and Commodities (FICC) S&T also reported strong performance, with a 35% year-over-year increase in the fourth quarter and a 9% increase for the full year of 2024.
AWM revenues were bolstered by equity investments, which benefited from significantly higher mark-to-market net gains from investments in public equities. The Platform Solutions segment reported pre-tax losses of $252 million, slightly higher than JPMorgan's estimated pre-tax loss of $236 million.
Compensation expenses for the full year rose by 8% year-over-year, which was outpaced by a revenue increase of 16%. Notably, while overall stated costs decreased by 2% year-over-year, the comparison to the previous year is complicated due to several one-time expenses in 2023.
Goldman Sachs also executed a $2 billion share buyback during the fourth quarter, exceeding JPMorgan's estimate of $1.5 billion. The bank further reduced historical principal investments by $1.5 billion in the fourth quarter, bringing the total to $9.4 billion.
In summary, JPMorgan views the latest financial results from Goldman Sachs as a demonstration of the bank's strong capability to leverage higher capital markets activity and maintain its franchise strength in its core businesses. The firm anticipates that Goldman Sachs shares will perform better than its peers based on these outcomes.
Notable long-term achievements include maintaining dividend payments for 26 consecutive years, with a current yield of 2.1%. For deeper insights into Goldman Sachs's financial health and growth prospects, including 12 additional ProTips and comprehensive valuation metrics, visit InvestingPro for the full research report.
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