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Goldman Sachs (GSFree Goldman Sachs Stock Report), a global leader in investment banking, securities, and investment management, reported a decline in earnings during the first quarter of 2014. Share net came in at $4.02, down somewhat from $4.29 in the same period last year, but slightly above our previous projection of $4.00. Net revenues (excluding interest expense), meanwhile, came in at a subdued $10.9 billion, somewhat below our previous estimate of $11.8 billion for the period.

Despite the overall decline, markets responded positively to the news, as the numbers were stronger than had been anticipated in light of difficult conditions in many of the company's operating segments.

Investment Banking revenues of $1.78 billion were 13% higher than for the same period in 2013. The rise was led by a 41% jump in financial advisory revenues, which reflected an increase in client activity in Europe as that market recovers from years of financial crises and flat to negative growth. Equity underwriting revenues saw a bounce as well, due to strong activity among private placements and initial public offerings.

Institutional Client Services, the company's largest segment, saw a 13% decline in the period compared to the same period last year, though it marked a significant recovery over the final quarter of 2013. This resulted from a slight strengthening in market-making activity, but conditions for that sector remain difficult, particularly in emerging markets, which have seen tumult in their equity markets in recent months.

A significant drop in the Investing & Lending segment was partially offset by a rise in Investment Management, which saw higher incentive and management fees due to a significant increase in assets under supervision.

The company maintained its market-leading position in investment banking, ranking first in worldwide mergers and acquisitions, as well as equity offerings and initial public offerings. It also maintained a strong capital position, with a Tier 1 capital ratio of 16.3% and common equity Tier 1 ratio of 14.6%.

The main risk to the company going forward remains the implementation of the Volcker rule, which is being put into place by regulators pursuant to the Dodd-Frank Wall Street Reform Act, and is meant to limit banks' ability to trade on their own accounts, a process known as proprietary trading, and restricts them from investing in hedge funds. The regulations may have a greater effect on Goldman Sachs than other large banks, as a disproportionately high percentage of its revenues come from trading activity.

For the full year of 2014, we are projecting earnings per share of $15.40, and revenues of $40.85 billion. Meantime, these modest-yielding shares offer significantly above-average total return potential out to 2017-2019, though we advise investors to remain alert to the impact of new regulations regarding the company's trading activities.

About The Company:The Goldman Sachs Group is a global investment banking and securities firm. It operates in four business segments: Investment Banking (18% of 2013 revenues); Institutional Client Services (46%); Investing & Lending (21%); and Investment Management (15%). Last year, 42% of the company’s revenues came from outside of the Americas.

At the time of this article’s writing, the author did not have positions in any of the companies mentioned.