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4 Reasons to Add Goldman (GS) Stock to Your Portfolio Now
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It seems to be a wise idea to add The Goldman Sachs Group, Inc. (GS - Free Report) stock to your portfolio now. The company’s fundamental strength and growth prospects make it a good investment option.
Analysts are optimistic regarding its earnings growth potential. Over the past 30 days, the Zacks Consensus Estimate for GS’s 2024 earnings has been revised 3.7% upward. Thus, the company currently sports a Zacks Rank #1 (Strong Buy).
Its price performance also seems impressive. The stock has gained 36.9% over the past six months compared with the industry’s growth of 32.9%.
Image Source: Zacks Investment Research
Some other factors mentioned below make Goldman a solid pick right now.
Strategy Pivot to Aid: GS decided to refocus on its core strengths of investment banking (IB) and trading operations, while scaling back its consumer banking footprint. It, hence, undertook a major business-restructuring initiative. In first-quarter 2024, the company completed the sale of GreenSky, its home-improvement lending platform, to a consortium of investors. It is offloading its credit card program with General Motors. This is in line with its decision to focus and grow core businesses, wherein it has showcased encouraging results, given its strong leadership position, wide scale of operations and exceptional talent.
Strength in IB Business to Drive Revenues: In 2023, Goldman was in the top position in worldwide announced and completed mergers and acquisitions (M&As), equity and equity-related offerings, and common stock offerings. This likely gives it an edge over its peers. We believe that robust client engagement, backed by digital disruption and transformation trends, signs of growing M&A and underwriting pipelines, and the company’s decent IB backlog will support IB revenues in the upcoming period. We expect IB fees to rise 17.8% and 3.2% year over year in 2024 and 2025, respectively.
Robust Balance Sheet: As of Mar 31, 2024, cash and cash equivalents were $209 billion. As of the same date, total unsecured debt (comprising long-term and short-term borrowings) was $312 billion. Out of this, only $78 billion were near-term borrowings. Moreover, the company maintains investment-grade long-term debt ratings of A/A2/BBB+ and a stable outlook from Fitch Ratings, Moody’s Investors Service, and Standard & Poor's, respectively. Thus, the company's decent cash levels and solid credit profile indicate that it will likely be able to continue to meet debt obligations even during economic slowdowns.
Capital Distributions to Stoke Investor Confidence: Goldman’s capital distribution activities have been impressive over the years. In February 2023, it announced a share repurchase program, authorizing repurchases of up to $30 billion of common stock with no expiration date. As of Mar 31, 2024, shares worth $22.7 billion remained under the current authorization. Apart from consistent share buybacks, it announced a 10% hike in the common stock dividends in July 2023. Given its decent liquidity, such capital distribution activities seem sustainable. This is likely to stoke investors’ confidence in the stock.
WFC’s earnings estimates for 2024 have been revised upward marginally in the past month. Shares of Wells Fargo have jumped 42.7% over the past six months.
NTRS’ earnings estimates for 2024 have been revised 3% upward in the past month. Shares of Northern Trust have gained 12.9% over the past six months.
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4 Reasons to Add Goldman (GS) Stock to Your Portfolio Now
It seems to be a wise idea to add The Goldman Sachs Group, Inc. (GS - Free Report) stock to your portfolio now. The company’s fundamental strength and growth prospects make it a good investment option.
Analysts are optimistic regarding its earnings growth potential. Over the past 30 days, the Zacks Consensus Estimate for GS’s 2024 earnings has been revised 3.7% upward. Thus, the company currently sports a Zacks Rank #1 (Strong Buy).
Its price performance also seems impressive. The stock has gained 36.9% over the past six months compared with the industry’s growth of 32.9%.
Image Source: Zacks Investment Research
Some other factors mentioned below make Goldman a solid pick right now.
Strategy Pivot to Aid: GS decided to refocus on its core strengths of investment banking (IB) and trading operations, while scaling back its consumer banking footprint. It, hence, undertook a major business-restructuring initiative. In first-quarter 2024, the company completed the sale of GreenSky, its home-improvement lending platform, to a consortium of investors. It is offloading its credit card program with General Motors. This is in line with its decision to focus and grow core businesses, wherein it has showcased encouraging results, given its strong leadership position, wide scale of operations and exceptional talent.
Strength in IB Business to Drive Revenues: In 2023, Goldman was in the top position in worldwide announced and completed mergers and acquisitions (M&As), equity and equity-related offerings, and common stock offerings. This likely gives it an edge over its peers. We believe that robust client engagement, backed by digital disruption and transformation trends, signs of growing M&A and underwriting pipelines, and the company’s decent IB backlog will support IB revenues in the upcoming period. We expect IB fees to rise 17.8% and 3.2% year over year in 2024 and 2025, respectively.
Robust Balance Sheet: As of Mar 31, 2024, cash and cash equivalents were $209 billion. As of the same date, total unsecured debt (comprising long-term and short-term borrowings) was $312 billion. Out of this, only $78 billion were near-term borrowings. Moreover, the company maintains investment-grade long-term debt ratings of A/A2/BBB+ and a stable outlook from Fitch Ratings, Moody’s Investors Service, and Standard & Poor's, respectively. Thus, the company's decent cash levels and solid credit profile indicate that it will likely be able to continue to meet debt obligations even during economic slowdowns.
Capital Distributions to Stoke Investor Confidence: Goldman’s capital distribution activities have been impressive over the years. In February 2023, it announced a share repurchase program, authorizing repurchases of up to $30 billion of common stock with no expiration date. As of Mar 31, 2024, shares worth $22.7 billion remained under the current authorization. Apart from consistent share buybacks, it announced a 10% hike in the common stock dividends in July 2023. Given its decent liquidity, such capital distribution activities seem sustainable. This is likely to stoke investors’ confidence in the stock.
Other Stocks Worth a Look
Some other top-ranked stocks are Wells Fargo & Company (WFC - Free Report) and Northern Trust Corporation (NTRS - Free Report) , each sporting a Zacks Rank #1 at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
WFC’s earnings estimates for 2024 have been revised upward marginally in the past month. Shares of Wells Fargo have jumped 42.7% over the past six months.
NTRS’ earnings estimates for 2024 have been revised 3% upward in the past month. Shares of Northern Trust have gained 12.9% over the past six months.