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Goldman Sachs (GS) Shares Soar on Earnings Beat

Ian Wyatt

A few days after Wells Fargo’s (NYSE: WFC) fourth-quarter earnings failed to impress investors, another big bank’s earnings are proving to be a smashing success on Wall Street this morning.

Goldman Sachs (NYSE: GS) nearly doubled its profits from a year ago, with earnings per share nearly triple last year’s tally. The $5.60 in per-share earnings blew analyst estimates of $3.78 per share out of the water.

Goldman’s stock opened the day up 2.5% after the investment bank’s early-morning earnings report.

Vast improvements in the bank’s investment branch made the difference. With $1.41 billion in fourth-quarter revenue, Goldman’s investment branch outpaced its performance in the fourth quarter a year ago ($857 million) and in the previous quarter ($1.16 billion).

Given all the uncertainty of the fiscal cliff in the fourth quarter, Goldman’s investing improvements were especially encouraging – and could bode well for fellow investment bank Morgan Stanley (NYSE: MS), which reports earnings on Friday. In fact, Morgan Stanley’s shares are already riding Goldman’s earnings beat, rising 2% in early trading.

To be fair, Goldman’s stellar earnings weren’t solely because the firm made better investments. The bank has shed over 1,000 employees in the past year, and total compensation for its employees has declined 11%. The smaller workforce has certainly helped the company’s bottom line.

Still, this was Goldman Sachs’ most profitable quarter in years. Right now, that’s driving the stock to its highest level in 18 months. 

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