Thursday, September 20, 2007

Goldman Crushes

WOW, this quarter by Goldman (GS) has to go down as one of its most impressive quarters considering both the environment it operated under and the results of it's peers.

With Morgan Stanley (MS), Lehman (LEH) and Bear Sterns (BSC) all posting lowered results, Goldman not only beat last years $3.26 but sprinted past it at $6.13 which is about a full $2 more than estimates.

Here is the breakdown:

* Investment Banking produced record quarterly net revenues of $2.15 billion, driven by results in Financial Advisory which were 64% higher than the previous record.
* Goldman Sachs ranked first in worldwide announced mergers and acquisitions for the calendar year-to-date.
* Fixed Income, Currency and Commodities (FICC) generated record quarterly net revenues of $4.89 billion, reflecting strength across most businesses.
* Equities generated record quarterly net revenues of $3.13 billion, including record commissions.
* Asset Management generated record management and other fees of $1.15 billion. Assets under management increased 27% from a year ago to a record $796 billion, with net inflows of $50 billion during the quarter.
* Securities Services achieved record quarterly net revenues of $762 million, reflecting continued strength in the prime brokerage business.

Lloyd C. Blankfein, Chairman and Chief Executive Officer said, "Given the difficult environment of the third quarter, many of our businesses were challenged,".

Challenged? I would love to see what he considered an "easy" quarter. These results blew everyone away and with Goldman some $20 off it's all time high and trading at a single digit PE ratio, expect a sharp run up in shares today.

In my earnings preview post I expected two key factors to enable Goldman to beat estimates, trading and international operation. Revenue in the trading and principal investments division soared 70% to $8.23 billion. The segment was led by its bond, currencies and commodities business, where net revenue climbed 71% to a record $4.89 billion amid "significantly" higher revenue in the currencies and interest-rate segments.

Did Goldman suffer mortgage write down like the other brokerage houses did? Sure, but unlike the others, these write downs "where more than offset by gains in short mortgage positions". Duh...apparently they were the only ones who thought of this..

Much was mockingly said about Goldman and their reputation as being the "smartest guys in the room" after they injected $3 billion into one of their funds recently.

This quarter ought to make those same folks eat their words...

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