It has been about a month since the last earnings report for Goldman Sachs (GS Quick QuoteGS - Free Report) . Shares have added about 11.8% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Goldman due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

Goldman Q3 Earnings Beat Estimates, Revenues Fall Y/Y

Goldman’s third-quarter 2023 earnings per share of $5.47 surpassed the Zacks Consensus Estimate of $5.32. Also, the bottom line fell 34% from the year-earlier quarter.

Goldman’s results have been supported by strong FICC financing revenues, as well as strength in the consumer banking business.

Net earnings of $2.05 billion plunged 33% from the prior-year quarter. Our estimate for the metric was $1.80 billion.

Revenues Decline, Expenses Rise

Net revenues of $11.82 billion fell 1% from the year-ago quarter. Nonetheless, the top line surpassed the Zacks Consensus Estimate of $11 billion.

Total operating expenses increased 18% year over year to $9.05 billion. Our estimate for the metric was $7.99 billion. Higher depreciation and amortization led to the increase.

Provision for credit losses was $7 million lower than $515 million in the prior-year quarter.

Quarterly Segmental Performance Mixed

The Asset & Wealth Management division generated revenues of $3.23 billion in the reported quarter, down 20% year over year. Our estimate for the metric was $3.57 billion. Results reflect higher fees from private banking and lending, offset by the net loss in equity investments and a decline in incentive fees.

Firmwide assets under supervision were a record $2.68 trillion, down from $2.71 trillion in the prior quarter.

The Global Banking & Markets division recorded revenues of $8 billion, up 6% year over year. Our estimate for the metric was $7.02 billion. The fall indicated strength in the investment banking (IB) business (up 1%) and higher equities revenues (up 8%), partially offset by lower net revenues in FICC (down 6%).

The Platform Solutions division’s revenues were $578 million, rising 53% year over year. Our estimate for the metric was $504.4 million. The jump was driven by significantly higher revenues from consumer platforms.

Capital Ratios Mixed

As of Sep 30, 2023, the standardized Common Equity Tier 1 capital ratio was 14.8%, up from the prior quarter’s 14.9%. The company’s supplementary leverage ratio was 5.6%, unchanged from the prior quarter.

Capital Deployment Update

In the quarter under review, Goldman returned $2.44 billion of capital to common shareholders. This included $1.50 million in share repurchases and common stock dividends of $937 million.

2023 Outlook

Management targets $1 billion in expense savings ($600 million in payroll and $400 million in non-compensation expenses). It expects tax rate to be around 23%.

Medium-Term Targets

The company expects to achieve gross inflows of $225 billion for alternative investments from 2020 through 2024 end. Of this, third-party commitments raised were $193 million as of the first-quarter 2023 end.    

Goldman expects to achieve more than $10 billion in firmwide management and other fees in 2024. Of this, more than $2 billion in alternative management fees are expected.

It expects to achieve pre-tax profitability by 2025 end for the Platform Solutions segment. In the asset and wealth management segment, Goldman reiterated to achieve pre-tax margins in the mid-20s range and ROE in the mid-teens range in the medium-term (three to five years).

In its efforts to reduce balance sheet density, the company intends to reduce the historical principal investment portfolio by less than $15 billion by 2024 and completely exit the portfolio within the next three to five years.

Through-the-cycle, Goldman targets a ROE of 14-16%, a return on average tangible common shareholders’ equity (ROTE) of 15-17% and an efficiency ratio of 60%.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates review.

The consensus estimate has shifted -11.98% due to these changes.

VGM Scores

At this time, Goldman has a poor Growth Score of F, a grade with the same score on the momentum front. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Goldman has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

Performance of an Industry Player

Goldman belongs to the Zacks Financial - Investment Bank industry. Another stock from the same industry, The Charles Schwab Corporation (SCHW Quick QuoteSCHW - Free Report) , has gained 8.2% over the past month. More than a month has passed since the company reported results for the quarter ended September 2023.

The Charles Schwab Corporation reported revenues of $4.61 billion in the last reported quarter, representing a year-over-year change of -16.3%. EPS of $0.77 for the same period compares with $1.10 a year ago.

For the current quarter, The Charles Schwab Corporation is expected to post earnings of $0.70 per share, indicating a change of -34.6% from the year-ago quarter. The Zacks Consensus Estimate has changed -4.9% over the last 30 days.

The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for The Charles Schwab Corporation. Also, the stock has a VGM Score of D.