Goldman Sachs (GS) reported a jump in third-quarter earnings this morning on strong results from its trading and principal investments business. Goldman’s earnings per share (EPS) surged to $5.25, beating EPS of $1.81 in the same quarter in 2008 and consensus estimates of $4.24 profits per share.
Despite beating analyst expectations, shares of Goldman Sachs sank as low as $187.71 at the open this morning from the previous day's close of $192.28. The share price bounced back a bit later in the morning, settling in around $188.30 at 11:30am. Investors appeared to be expecting a blowout number. Alternatively, a major drag on Goldman's share price may be whether Goldman and other banks like Citigroup (C) have large enough loss reserves to cover remaining toxic assets.
The company reported net earnings in the third quarter of $3.0 billion, compared with $810 million for the year-ago quarter in 2008. 2008 same quarter profits were $845 million.
The top line for the quarter jumped from third quarter 2008 net revenue of $6.0 billion last year to $12.4 billion in the quarter ending September 25, 2009. Analysts were expecting top line revenue of $11.0 billion for the quarter.
Lloyd Blankfein, chairman and CEO said, “Although the world continues to face serious economic challenges, we are seeing improving conditions and evidence of stabilization, even growth, across a number of sectors.”
Net revenues by segment were $899 million in Investment Banking, 31 percent worse than the third quarter of 2008; $325 million in Financial Advisory, 47 percent lower than 2008; and, $10.0 billion in Trading and Principal Investments, beating the previous year handily and higher by 270 percent compared to $2.7 billion in the previous year.
Goldman's Board of Directors also declared a quarterly cash dividend of 35 cents per common share. The dividend yield for Goldman Sachs shares is 0.7 percent. The dividend is payable on December 30, 2009 to common shareholders of record on December 2, 2009.
Since the beginning of 2009, Goldman shares have gained 117 percent, blowing out the 21.4 percent gain in the S&P 500 index (SPY). Goldman's share price has been well above the 50-day moving average level since mid-July and the 200-day moving average since mid-April of this year.
Looking forward, CEO Blankfein stated in a release, “because the job market, and growth more generally, remain under stress, we continue to be focused on actively helping our clients in order to promote greater economic activity.”
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