Goldman Sachs reported a blowout quarter Tuesday, fueled by booming activity on Wall Street, sending shares to fresh all-time highs. The stellar results, coupled with CEO David Solomon’s rosy outlook, reinforce our desire to own the investment banking giant in a moment tailor-made to its strengths. Revenue in the second quarter rose 39.5% year over year to $20.34 billion, crushing the consensus of $16.13 billion, according to LSEG. Earnings per share (EPS) in the three months ended in June surged 92% to $20.98, a huge beat versus the $14.48 consensus, according to LSEG data. Shares of Goldman jumped 7.5% and are on pace for their best single-day move in over a year. The stock also set a new intraday record high of roughly $1,136 apiece. To close at a record, Goldman needs to end the day above $1,106.37, its current closing peak set on June 22. GS 1Y mountain Goldman Sachs 1-year return Bottom line Expectations were high for Goldman Sachs, which during the period co-led SpaceX’s record-breaking initial public offering, helped steer Alphabet’s enormous secondary stock sale, and advised on the $67 billion NextEra-Dominion Energy merger . Plus, the stock market had a big rebound from its Iran war lows, while oil prices and bonds whipsawed — an ideal backdrop for Goldman’s trading desks, which thrive on volatility. Despite all these well-known wins, Goldman still blew past estimates. Jim Cramer summed it up like this: Everyone expected a good quarter, “but not this good.” Goldman’s three most important businesses — investment banking, trading, and asset and wealth management — all exceeded consensus revenue expectations, unlike in the first quarter of this year, when only investment banking delivered a clean beat. Additionally, key metrics used to evaluate a bank’s performance were also much better than expected. In particular, Goldman’s efficiency ratio — calculated by dividing the firm’s expenses by its revenues — was 57.4%, a multiyear low (lower is better here). Return on tangible common equity, a measure of how efficiently the bank generates profits from its capital, was 25.5%. While the second quarter featured some extraordinary deals, Goldman struck an upbeat tone on the pipeline of future activity — and that’s notable for anyone worried about the sustainability of the performance. “Even with very strong investment banking revenues this quarter, our backlog increased to its highest level in five years and its second highest level on record, underpinned by a record advisory backlog and reflecting the strength and breadth of our client engagement,” chief executive Solomon said on the earnings call. Advisory work typically involves mergers and acquisitions (M & A). Solomon indicated that part of the investment banking business is benefiting from the Trump administration’s more accommodative stance on takeovers and tie-ups. This follows tougher enforcement during the Biden era. “CEOs are dreaming and thinking about really large,…
Read More: We’re raising our price target on Goldman Sachs after a blowout quarter