Goldman Sachs beats expectations as the earnings season starts with financials releasing their Q1 2021 earnings
Goldman Sachs started the Q1 2021 earnings season by reporting results exceeding analysts’ expectations. The financial services giant reported net earnings of $6.84 billion and earnings-per-share (EPS) of $18.62 for the first quarter of the year.
The investment banking division is responsible for 21% of the total net revenue of $17.70 billion for the quarter. The asset and consumer management divisions contributed to a combined 36%, with the remainder belonging to global market divisions.
Source: Goldman Sachs
Q1 2021 Earnings Highlights
The quarterly earnings are closely monitored by investors as they have huge implications for the proper valuation of a company. Investors estimate future cash flows, then discount them to the present to calculate the intrinsic value of a company. If a company appears undervalued, investors will buy its shares. If it appears to be trading at market value, they will hold. If it appears overvalued, investors will likely sell existing holdings or even sell short.
Goldman beat revenue expectations by over $5 billion and EPS expectations by over $8-per-share. Net revenues more than doubled from the same period in 2020, with record asset management net revenues. Book value per common share rose by 6.2% as the firm returned over $3 billion to common shareholders.
Goldman managed to retain its number one spot in worldwide announced and completed mergers. It also repurchased $2.7 billion worth of shares, in a sign that the company sees its shares undervalued by market participants.
Unsurprisingly, the share price increased on the announcement. Goldman’s shares are up 27% YTD and over 100% in the last five years, currently trading close to all-time highs.
These encouraging results for the quarter are likely to be mirrored by other companies in the financial sector. In fact, the market expects a strong quarter, as the fiscal stimulus and the gradual reopening of the economy encouraged spending. Goldman Sachs (and others) can only have benefited from interest in financial markets increasing exponentially.