From FT Alphaville:
Well yes, but other than that Mrs. Lincoln...
Analysts are starting to respond to the blow-out first quarter figures from Goldman Sachs with wait for it…a flurry of ‘buy’ recommendations.
In fact, heading into the results the number of ‘buy’ ratings on Goldman was at a five year high, according to Bloomberg. And there’s seemingly nothing in Tuesday’s statement that looks set to change that.
Merrill Lynch says the key driver of the beat was another strong performance from Goldman’s Fixed Income, Currency and Commodities (FICC) business. (That’s the incomprehensible black box part of the bank in case you were wondering).
The key revenue-surprise driver vs. our model was Trading, in both FICC and Equities, where net revenues were considerably above forecast despite only 4% increase in assets and markets that were not particularly volatile. The firm noted that bid-offer spreads in FICC were “tighter” than a year ago, but results reflected less losses than in the yearago period. In Equities, commissions were weak (below q1:09) but derivatives and other principal revenues were strongDeutsche Bank also touches on the fraud charges, but retains a buy recommendation:
The results are clearly exceptional and the 20% ROE belies the 1.3x P/B ratio, which discounts only 13% long-term ROE. But the SEC’s lawsuit announced Friday, and the potential for regulatory change that could make derivatives trading less lucrative, drive uncertainty. This said, we continue to find GS an attractive value.Glen Schorr at UBS reckons Goldman is in a good place if it can get past this SEC suit...MORE
Goldman reported operating EPS of $5.59, ahead of our/Street est. of $4.25/ $4.01. The beat was primarily driven by higher FICC and equity trading revs and a lower than expected comp ratio. Despite the beat in the qtr, the industry regulatory headwinds & the recent fraud charge by the SEC are likely to limit the near term upside in the stock. Despite the near term headwinds, given GS’s strong positioning, improving activity levels, valuation, and lower comp ratios for the industry, we continue to like the longer term risk/reward as we get regulatory clarity & maintain our Buy.