Goldman Sachs shares jumped to near all-time highs Wednesday after the investment bank reported strong fourth-quarter results and signaled that more dealmaking is on the way. Revenue for the three months ended Dec. 31 increased over 22% year over year to $13.9 billion, far outpacing expectations of $12.4 billion, according to estimates compiled by LSEG. Earnings per share (EPS) more than doubled versus the year-ago period, coming in at $11.95 and exceeding the $8.22 expected, according to LSEG. Bottom line Goldman Sachs delivered a fantastic set of results to close out the year. We are reiterating our buy-equivalent 1 rating and price target of $650. Fourth-quarter revenue came in roughly $1.5 billion ahead of expectations, fueled by strength in both net interest income and non-interest revenue. All three key operating segments also posted stronger-than-expected revenues. Meanwhile, earnings per share more than doubled year over year. Goldman Sachs “once again ended the year as the No. 1 M & A advisor in markets,” CEO David Solomon said on the call — a vivid illustration of why we started a position in Goldman stock last month and swapped out of rival Morgan Stanley. We’re expecting to see an increase in mergers-and-acquisitions activity, as well as initial public offerings, in 2025. Goldman is a better, more focused way to ride that expected M & A wave. “There has been a meaningful shift in CEO confidence, particularly following the results of the U.S. election,” Solomon said, in another encouraging remark for our thesis. “Additionally, there is a significant backlog from sponsors and an overall increased appetite for dealmaking supported by an improving regulatory backdrop. The combination of these conditions should spur further activity in 2025.” CFO Denis Coleman added: “While there remained some policy uncertainty, there is an expectation that the regulatory burden will be reduced, which should serve as a tailwind to risk assets and capital deployment. We are optimistic on the outlook for 2025 and expect to further pickup in M & A and IPO activity.” Indeed, Goldman’s investment backlog rose sequentially in the fourth quarter, Coleman said. Goldman Sachs (GS) Why we own it: Goldman Sachs is our bet on a rebound in dealmaking as the regulatory environment once President-elect Donald Trump returns to the White House next week. Initiation date: Dec. 19, 2024 Most recent buy: Jan. 7, 2025 Competitors: Morgan Stanley, JPMorgan, Bank of America and Citigroup Goldman’s headline numbers were especially high quality, judging by its performance on multiple metrics that all investors use to grade bank results. Those metrics include the efficiency ratio and return on tangible common equity, or ROTCE. We also loved Goldman’s cash returns to shareholders in the October-to-December period. The firm repurchased $2 billion worth of shares in the quarter— 3.5 million shares total — at an average purchase price of $566.27, a solid level given shares…
Read More: Goldman backs up our bank stock shuffle with strong earnings, upbeat M&A