The stock price was up nearly 3% on Monday.
The major financial firms have gotten off to an unexpectedly good start this year, given the economic challenges, volatility, and stock market declines.
But it is the volatility, in fact, that has buoyed the big financial firms, as turbulent markets have led to a lot of trading, which has boosted revenue.
The latest white shoe firm to post strong first quarter numbers is Goldman Sachs (NYSE:NYSE). Goldman Sachs surpassed revenue and earnings estimates and like some of the others, the volatility was a big reason why.
Volatility drives revenue spike
Goldman Sachs generated $15.06 billion in revenue in the first quarter, which was up 6% year-over-year and 9% from the previous quarter. It was also the firm’s third highest quarterly revenue total ever and topped estimates of $14.81 billion.
The overwhelming driving force was its global banking and markets business, which includes investment banking and institutional trading. Revenue in this segment was up 10% year-over-year, led by a 27% increase in equity trading. The equity trading segment generated $4.2 billion in revenue, a record for the company in that business line.
“In Global Banking and Markets, ongoing policy uncertainty and market volatility drove many clients to reposition their portfolios, driving higher activity in our FICC and equities businesses,” Goldman Sachs chairman and CEO David Solomon said on the earnings call. “I’m proud that we were able to support the intermediation and financing needs of our clients, all while keeping a keen eye on risk management.”
The gains in the markets/equity trading segment offset year-over-year revenue declines in investment banking and asset management.
It also helped drive net earnings 17% higher to $4.6 billion, and earnings per share 22% higher to $14.123 per share. That crushed earnings estimates of $12.35 per share.
Volatility continues in April
The first quarter results do not include April, which has seen extreme volatility so far in reaction to President Donald Trump’s tariffs and the retaliatory tariffs that have followed.
“We obviously saw significant moves in equity markets as people position for a different kind of trade policy during March,” Solomon added on the call, according to Investing.com. “And we saw significant moves in the March period, which actually led to higher activity for us in a variety of ways. We’re early in the quarter. But so far, the business is performing very well, and clients are very active. And, I know there is a higher level of uncertainty. But at the same point, clients are active. People are shifting positions. And we still see significant activity levels.”
It might not be a bad time to consider Goldman Sachs stock, as the uncertainty may not be a total negative, like it is for many other companies. It also does not have much of a consumer banking arm, so it won’t be as impacted by an economic slowdown or recession. Plus, lower interest rates could help spur more M&A activity.
Further, the stock is pretty cheap with a P/E ratio of just 12. Analysts are fairly bullish with a median price target of $600 per share, which would be an 18% increase over the current price.
