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Goldman Sachs blew past consensus expectations with its earnings report for the second quarter Wednesday, posting a net profit some 60% above analysts’ forecasts thanks to a massive windfall from its bond and equities trading operations
Goldman announced earnings per share of $6.26 on revenue of $13.30 billion, the second-highest quarterly revenue it has ever posted. The market had anticipated EPS of only $3.9 on revenue of $9.7 billion. The potential for an upside surprise had been evident after two of Goldman’s biggest rivals, JP Morgan and Citigroup, both posted blowout quarters for fixed-income trading on Tuesday.
Goldman said its fixed-income division posted its best quarterly revenue in nine years at $4.24 billion, while equities trading generated $2.94 billion, the highest in 11 years. Group revenue was up 41% from a year earlier. However, earnings were lower because of a $945 million litigation cost.
Compared to JP Morgan and Citi, Goldman has a relatively small book of corporate loans at risk from the wave of bankruptcies caused by the pandemic. It still recorded provisions against possible loan losses of $1.59 billion, up from $214 million a year earlier and $937 million in the first quarter.
Goldman did highlight five risks to the outlook. One is deglobalization, which puts both sales and earnings at risk. Another is taxes, with the plan from current presidential front-runner Joe Biden implying a 12% drop to S&P 500 earnings, if implemented. Labor costs, demographics and index composition — the S&P 500 has averaged 35% turnover per decade since 1980 — also are risks.
The bank generated $2.42 billion in profit, or $6.26 a share, crushing the $3.78 a share. Revenue of $13.3 billion was more than $3.5 billion higher than the estimate, fueled by strong results in its trading and investment banking divisions, which made up three-quarters of the firm’s revenue in the period.
Bank’s significant milestones for the quarter includes revenue of $13.3 billion was the second-highest ever for the firm and up 41% from a year ago, fixed income trading revenue came in at $4.24 billion, the highest in 9 years, equities trading revenue was $2.94 billion, the best quarter in 11 years and Investment banking revenue was a record $2.66 billion.
On the technical front, the RSI is at 59.28% and suggests that the market can move in an upward direction. The current price is trading above all the Moving Averages. The stochastic is forming an upside crossover.
Overall Bias is Positive and Short-term trades can be initiated with below mentioned Stop Loss and Profit targets.
Trade Suggestion-– Buy at $214.8 Take Profit at $250 Stop Loss at $190