To The Moon

$Goldman Sachs(GS)$ is set to report fourth-quarter results before the market opens on 15 Jan (Wednesday), analysts expecting revenue and net interest income growth.

Market expects the bank to report revenue of $12.3 billion, 8.7% higher year-over-year, and net interest income of $2.1 billion, up from $1.34 billion a year earlier, after a stronger-than-expected third quarter. 

The consensus EPS forecast came in at $8.17 which is significantly higher than same period last year EPS of $5.48.

GS Was Up 8.22% Since Its Previous Earnings On 15 Oct 2024

GS share price have been up 8,22% since its previous quarter earnings on 15 Oct 2024, the October earnings call highlighted strong financial performance across various segments, notably Asset & Wealth Management and Global Banking & Markets.

However, some challenges persist, particularly in the consumer business and ongoing regulatory uncertainties. The positive aspects, especially the record-breaking achievements and growth in key areas, outweigh the negative points.

GS Guidance Cautious For 2024

During the Goldman Sachs Q3 2024 earnings call, the executives provided guidance highlighting several key metrics and strategic insights. The firm reported net revenues of $12.7 billion, an increase of 7% year-over-year, with an earnings per share (EPS) of $8.40, which was up 54% compared to the previous year. The return on equity (ROE) stood at 10.4%, while the return on tangible equity (RoTE) was 11.1%. In Global Banking and Markets, revenues reached $8.6 billion, with advisory revenues rising to $875 million and equity underwriting revenues increasing by 25% year-over-year.

Asset & Wealth Management revenues were up 16% year-over-year to $3.8 billion, with assets under supervision surpassing $3 trillion for the first time. The firm emphasized its focus on narrowing its consumer footprint, which had a negative impact of 80 basis points on ROE.

Despite challenges, Goldman Sachs continues to invest in its global franchises and alternative fundraising, expecting to exceed $60 billion in fundraising for 2024. The executives also discussed concerns regarding the regulatory process related to Basel III revisions and the impact on capital requirements, stressing the importance of getting it right to avoid increasing credit costs for businesses.

GS Corporate Insiders Selling In Q4 To Watch

We are seeing in the last 3 months in 2024, corporate insiders placed informative sells of shares worth $37.3M. This might be something we need to be concerned, as GS have just announced to combine key business segments under a single unit named 'Capital Solutions Group,' to grow in private credit, private equity and other asset classes.

This could mean two things, one is to manage their operating expenses which could be eating into the net income interest, or they are expecting a growth in their private clients pool and also private equity.

Can GS Recent Move To Combine Business Segments Capture More Clients?

On Monday (13 Jan), GS announced plans to combine key business segments under a single unit named 'Capital Solutions Group,' to grow in private credit, private equity and other asset classes.

This move could help GS to benefit from a robust backdrop for improving fees and elevated trading, as well as efforts to consolidate their focus. Market is expecting broad growth across major institutional verticals from 4Q24 which could be led by gains in equities underwriting.

The improving IPOs could help to support equities trading though M&A growth may be more modest. GS could be expecting double digits from their Asset- and wealth-management fees.

GS Post Earnings Movement

The options market overestimated GS stocks earnings move 83% of the time in the last 12 quarters. The predicted move after earnings announcement was ±3.6% on average vs an average of the actual earnings moves of 2.4% (in absolute terms).

GS Earnings Implied Volatility Crush

GS's last earnings implied volatility (IV30) going into earnings was 27.1. The last time GS released earnings, the implied volatility dropped to 26.1, resulting in an implied vol crush of 4%. 5 days after earnings, the 30 day IV was 24.1.

• Average Implied Volatility Crush For GS Earnings: 11%

• Average 30 Day Implied Volatility 1 Day Before Earnings: 27.6

• Average GS 30 Day IV for the Day of Earnings: 24.7

• Average 30 Day Implied Volatility 5 Days After Earnings: 24.7

Technical Analysis - Multi-timeframe (MTF)

If we looked at GS, it is currently trading below the short-term MA, which is showing not much strength as bank stocks recover after weeks of downturn, and MACD is also showing potential crossover, so we might want to monitor how GS would move today (14 Jan).

From the MTF, we are seeing some uptrend on the higher period, but not enough to give us a strong upward trend, so I think we need to watch GS closely for more clues on whether their recent announcement to combine business segments could help to push its revenue earnings.

Summary

We need to watch the revenue growth as GS has highlight cautious on its 2024 guidance, and also not forgetting how the treasury yield moving higher could also make any tweaks to early December's implied guidance for $89 billion core NII and $95 billion of expenses will be in focus.

Appreciate if you could share your thoughts in the comment section whether you think GS would be able to post a better core NII.

@TigerStars @Daily_Discussion @Tiger_Earnings @TigerWire appreciate if you could feature this article so that fellow tiger would benefit from my investing and trading thoughts.

Disclaimer: The analysis and result presented does not recommend or suggest any investing in the said stock. This is purely for Analysis.