On Tuesday, CFRA raised its price target on Goldman Sachs (NYSE: GS) shares from $553.00 to $585.00, maintaining a Strong Buy rating. The adjustment reflects an anticipation of higher volumes in capital markets and increased fee income. The firm's forward price-to-earnings (P/E) ratio is set at 14.0x, which is a premium compared to the five-year historical average of 12.0x. This change is based on a positive outlook for the capital markets sector.
The analyst from CFRA also revised earnings per share (EPS) estimates for the coming years. The 2024 EPS forecast was decreased by $0.60 to $37.40, which is still above the consensus of $35.40. For 2025, the EPS estimate was increased by $0.75 to $41.75, compared to the consensus of $40.50. Goldman Sachs reported a third-quarter EPS of $8.40 for 2024, surpassing the consensus estimate by $1.09, and a revenue of $12.7 billion, which exceeded the $11.8 billion consensus.
The company's Global Banking & Markets segment experienced a revenue growth of 7% due to stronger capital markets activity. A notable 20% year-over-year increase in investment banking fees was driven by debt and equity underwriting. Although Fixed Income, Currencies, and Commodities (FICC) revenues fell by 12%, this was more than compensated for by an 18% rise in Equities trading revenues.
Goldman Sachs' Asset & Wealth Management division also showed a robust performance with a 16% year-over-year increase in revenues. The quarter set a record for management and other fees, while assets under supervision (AUS) reached a new peak of $3.10 trillion. The firm continues to focus on alternative investments, with AUS in this category climbing to $328 billion.
In other recent news, Goldman Sachs reported a significant 45% rise in third-quarter profit, driven by a robust performance in investment banking. The firm's success was marked by a 20% increase in investment banking fees, reaching $1.87 billion. In the same vein, leading Wall Street banks including Bank of America and Citigroup reported a surge in investment banking fees, attributed to an increase in deals and corporate debt issuance.
Goldman Sachs has also increased its forecast for China's 2024 GDP to 4.9%, in response to the Chinese government's recent implementation of stimulus measures aimed at bolstering the economy. Meanwhile, major brokerages including J.P.Morgan and BofA Global Research predict a 25 basis point reduction in U.S. Federal Reserve interest rates in November.
On the other hand, JPMorgan Chase (NYSE:JPM) and Wells Fargo are bracing for a dip in profits for the third quarter due to a contraction in interest income. Despite the current optimism, dealmakers remain cautious due to the upcoming U.S. elections and the geopolitical landscape, which could introduce regulatory and other uncertainties. These are some of the recent developments shaping the financial landscape.
InvestingPro Insights
Goldman Sachs' strong performance and positive outlook, as highlighted in the CFRA analysis, are further supported by real-time data from InvestingPro. The company's market capitalization stands at an impressive $173.5 billion, reflecting its significant position in the financial sector. Goldman's P/E ratio of 15.77 (adjusted for the last twelve months as of Q2 2024) aligns closely with CFRA's forward P/E projection of 14.0x, indicating a reasonable valuation relative to earnings.
InvestingPro Tips reveal that Goldman Sachs has raised its dividend for 12 consecutive years, demonstrating a commitment to shareholder returns. This is particularly noteworthy given the company's recent dividend growth of 20% over the last twelve months. The stock's strong performance is evident in its 73.67% total return over the past year, which corresponds with the positive sentiment expressed in the CFRA report.
Investors seeking more comprehensive insights can access additional InvestingPro Tips, with 13 more available for Goldman Sachs. These tips could provide valuable context for the company's financial health and market position, complementing the detailed analysis presented in the article.
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