Goldman Sachs Earnings: Removing Distractions for Potentially Strong Leverage to Market Recovery

Goldman Sachs continues to execute its plan of refocusing on its investment banking, trading, and investment-management businesses as it divests more of its consumer-facing operations. The company reported net income to common shareholders of $1.88 billion, or $5.47 per diluted share, on $11.82 billion of net revenue in the third quarter. Most of its revenue lines have been stuck in a range for the previous 1.5 years, with third-quarter revenue in the global banking and markets segment and asset and wealth segment and total net revenue within about 5% of the quarterly average since the second quarter of 2022. Excluding some arguably unusual items, such as losses on principal investments and expenses related to business divestitures, adjusted EPS would have been about $7.88 and annualized return on equity would have been 10.2% for the quarter. We don’t anticipate making a significant change to our $368 fair value estimate for narrow-moat-rated Goldman Sachs. We assess the shares as slightly undervalued.