Stock of the Day
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Goldman Sachs (GS)
Goldman Sachs Scores Big Profit
While markets remain fragile, some companies are emerging from the ashes much better than expected. It seems like it was just yesterday that the government was forking over billions of dollars to financial companies to prevent a total catastrophe in the economy. Goldman Sachs appears to be ahead of its counterparts. First, it paid back the bailout funds it received in record time and now the company has reported earnings that more than beat Wall Street's expectations. The company reported a 33 percent increase in second-quarter profits on Tuesday. How was the company able to report such impressive profits during troubling times? Should taxpayers be concerned or happy about the company's turnaround?
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| Stock Analysis |
Goldman Sachs reported earnings of $3.44 billion for the second quarter, driven largely by record revenues of $13.8 billion. Analysts were expecting the company to report earnings totaling $10.6 billion. Goldman Sachs blew that number out the water and because of that the company was able to pay the government back in a timely manner. The question still remains regarding how the company was able to perform so well during such unstable times? Goldman Sachs attributes its recent success to fixed-income, currencies and commodities. Equities revenue rose 28% to $3.18bn, while equity underwriting climbed to $736m from $616m and just $48m in the first quarter. Chairman and Chief Executive Lloyd Blankfein said in a press conference, “Our second-quarter results reflected the combination of improving financial market conditions and a deep and diverse client franchise.”
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The news from Goldman Sachs was pleasing to most, but still left some people concerned. Some people are worried that these financial giants will once again dominate Wall Street while unemployment rises into the double-digits and Main Street continues to suffer. Some of these concerns are valid given the situations that have been inflicted onto the economy by these financial institutions. The positives appear to outweigh the negatives though. Goldman has been able to pay the government back billions that it borrowed in record time. Hopefully those funds will be able to reduce the trillion dollar budget deficit that the United States is now facing. If the company continues to improve, that success should spill over into other markets and continue to boost the economy. Goldman Sachs will definitely ruffle a few feathers when it starts issuing compensation to its employees. Analysts estimate that the bank will set aside enough money to pay a total of $18 billion in compensation and benefits this year. The problem is that the government no longer has a say in how the company compensates its employee now that it has paid back the bailout funds that it received.
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Overall, the surge in profit at Goldman Sachs was welcomed with open arms. These results signal a remarkable turnaround for a company that was facing an uncertain future not even a year ago. Shares of Goldman Sachs continued to advance on Tuesday following the news and a positive outlook from analyst Meredith Whitney.
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Profile |
Click here to view a detailed profile of Goldman Sachs.
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