Goldman Displays Cost Control: Should You Hold The Stock?

Goldman Sachs (NYSE:GS) can be a solid bet now on the back of its leading global position in completed mergers and acquisitions in 2017. The company’s strong client activity amid volatile markets is anticipated to yield positive results for the stock.

Organic growth, cost management and steady capital-deployment activities continue to drive Goldman’s growth. However, litigation issues remain concerns.

Expense management and business diversification aided the company to gain 6.3% compared with 32.3% growth of the industry.

Further, the company’s earnings estimates moved 6.6% upward, for the current year, over the past 60 days. As a result, the stock carries a Zacks Rank #3 (Hold).

For the past few years, Goldman has been benefiting from its successful expense-reduction initiatives. Though expenses have been volatile, the figure declined significantly in 2016, but increased 3% in 2017 and 21% in first-quarter 2018. The company is focused on improving efficiency while maintaining strong franchise and investing in new opportunities. Notably, Goldman’s $5 billion of growth initiatives is expected to drive an incremental $2.5 billion in annual pre-tax earnings, at a 30% marginal ROE.

While overall revenues have been affected by unfavorable market conditions over the last few quarters, Goldman remains well positioned for growth, given its strong investment banking operations and solid client franchise. These, in turn, are likely to help the company leverage on the improving environment.

Furthermore, the key source of the company’s earnings stability is its business diversification. Within traditional banking, a diversified product portfolio has higher chances of sustaining growth than many other banks, which have exited some of these areas.

Driven by a solid capital position, Goldman has consistently enhanced shareholders’ value with steady capital-deployment activities. Its 2017 capital plan won regulatory approval that includes share buybacks and an increase in quarterly common stock dividend, along with issuance and redemption of other capital securities. In April 2018, the company increased its common stock dividend by 6.7%.

Stocks to Consider

Northern Trust Corporation (NASDAQ:NTRS) has been witnessing upward estimate revisions for the last 60 days. For the past six months, the company’s share price has been up more than 15%. It currently carries a Zacks Rank of 2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Comerica Incorporated (NYSE:CMA) has been witnessing upward estimate revisions, for the last 60 days. Additionally, the stock climbed nearly 27.5%, over the past six months. It currently carries a Zacks Rank #2.

State Street Corporation (NYSE:STT) has been witnessing upward estimate revisions, for the last 60 days. Also, the company’s shares have risen nearly 8.5%, in six months’ time. It also holds a Zacks Rank of 2, at present.

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