Earlier today, Goldman Sachs reported just awful earnings. In fact, this was the worst quarter of the Blankfein era. This morning, the Wall Street Journal (MoneyBeat) did a really cool live analysis of what was Goldman experienced in Q1.
Below are some of the points from their analysis (emphasis mine).
- Goldman Sachs just had its worst first quarter of the Blankfein era. Revenue last quarter was $6.34 billion.
- What happened to Goldman’s Investing & Lending equity securities business? A year ago this made $1.16 billion in net revenue for Goldman. Last quarter it made almost $1 billion. In the first quarter of 2016? Nothing. Zero. Zilch. Goldman reported this morning that the units revenue fell 100%.
- Goldman’s so-called investing & lending unit, where the bank generates revenue from its investments in private and public equities, saw a sharp drop in revenue in the first quarter. Net revenues in the division came in at $87 million, down 95% from $1.7 billion in the first quarter of 2015.
- The bank’s investment-banking revenue dropped to $1.46 billion in the first quarter, down 23% from the year-ago quarter. Revenues from financial advisory dropped 20% from a year-ago to $771 million. The bank pointed to a drop in M&A transactions. Revenue from underwriting were also down 27% to $692 million.
- “The operating environment this quarter presented a broad range of challenges, resulting in headwinds across virtually every one of our businesses,” said Lloyd C. Blankfein, Chairman and Chief Executive Officer. “Looking ahead, we will continue to focus on delivering superior service to our clients and managing our business efficiently, which remain essential to generating shareholder value over the long term.”
Goldman shares rise
Despite the disappointing quarter from Goldman Sachs, its shares are doing well in early trading. Goldman shares are now up around 2.0%.
Despite headwinds across virtually every one of their business segments, despite revenue and earnings falling off a cliff, despite it all, Goldman finished the day up 2.28%, closing at its highest levels since early January.
How you might ask?
Because the market already discounted all of the bad news. From June 2015 through February 2016, Goldman shares fell nearly forty percent, the slowdown was not news to anyone.
Stocks can go up on bad news because they play a relative game. It’s not how much did their earnings grow or shrink, it’s how much did they move relative to expectations. Stocks are not a function of good or bad, they’re a function of better or worse.
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