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Global investment banking leader Goldman Sachs (GS Free Goldman Sachs Stock Report) has reported mixed financial results for the second quarter. Revenue of $14.2 billion was about 4% higher than last year's figure and 5% better than our estimate. But earnings per share of $5.81 declined slightly from $5.98 last year and was about 3% short of our estimate. 

Investment banking revenue of $1.9 billion was down 9% year over year, primarily on a 20% decline in debt underwriting. Revenues from advisory and equity underwriting were off 3% and 1%, respectively. On a sequential basis, however, banking revenue improved 3%. Equity underwriting in particular jumped 78% from the first quarter, when deals slowed as a result of the government shutdown. We were encouraged to hear the company report that its advisory pipeline looks strong through the rest of the year.

Institutional Client Services revenue of $3.5 billion decreased 3% year over year. Fixed Income, Currency and Commodities Client Execution continued to operate in an environment marked by low levels of activity and volatility. Some of the weakness was offset by a 13% improvement in equity trading revenue. Meanwhile, Investment & Lending revenue of $2.5 billion grew 16% on significantly higher gains from private investments. 

In light of the roughly in-line performance compared with our estimates, we continue to look for Goldman Sachs to report revenue of $54.0 billion and earnings of $26.00 per share this year. Our outlook represents a 3% improvement in both revenue and share net. 

Finally, the company continues to return capital to shareholders. In the quarter, Goldman Sachs spent $1.3 billion to repurchase 6.2 million of its shares, bringing the respective totals for the first half of 2019 to $2.5 billion and 12.5 million shares. The board of directors also approved a nearly 50% increase in the quarterly dividend, to $1.25 per share. 

We believe the high-quality shares of Goldman Sachs remain a solid long-term investment on a risk-adjusted basis.

About The Company:The Goldman Sachs Group is a global investment banking and securities firm. It operates in four business segments: Investment Banking (22% of 2018 revenues); Institutional Client Services (37%); Investing & Lending (22%); and Investment Management (19%).

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