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Goldman 3Q tops estimates
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September 21, 1999: 10:19 a.m. ET
Investment bank cites hot merger, IPO markets after poor prior year conditions
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NEW YORK (CNNfn) - Goldman Sachs Group Inc. said Tuesday that third-quarter earnings jumped 90 percent, easily topping analysts' estimates, as the securities firm rode a hot market following last year's doldrums.
In its first full quarter as a public company, the leading investment bank said earnings rose to $638 million, or $1.31 a diluted share, in its fiscal third quarter ended Aug. 27
That was up from earnings of $329 million, or 69 cents a share, a year earlier, had Goldman been a public company, and surpassed analysts' estimates for a profit of $1.09 per share, according to First Call.
Earnings per share for the latest quarter would have been $1.38 a share had they not included a seven-cent-a share hit from compensation having to do with Goldman's initial public offering last spring.
Revenue rose 12 percent to $6.4 billion.
Goldman Sachs said the third-quarter 1999 figures were sharply higher than those a year earlier partly due to "adverse market conditions" that struck in the third quarter of 1998.
Investment banking generated revenue of $1.2 billion, a 20 percent increase from the prior year, as corporate consolidations kept merger and buyout activity steady. Initial public offering activity was also "robust," the company said.
The rebound from economic turmoil was especially visible in Goldman's trading and investments segment, which experienced a 212 percent gain in revenue to $1.4 billion. That better performance stemmed from improvements in credit-related businesses and commodities.
One analyst said those striking gains were due to smart investment decisions by Goldman in its own portfolio -- which for accounting purposes must be booked right away.
"They were in the right things," said Raphael Soifer, an analyst with Brown Brothers Harriman, who has a "neutral" rating on the stock. For that reason, if the market turns lower, it could put pressure on Goldman's own portfolio.
Market pressures -- namely in the credit and currency markets -- appeared to be weighing on Goldman shares early Tuesday despite the strong earnings report. Shares of Goldman Sachs (GS) fell 3/4 to 60 shortly after the open of trading, as the Dow industrials fell more than 100 points on declines in the dollar and Treasury bond prices.
Goldman is the first of several investment banks and brokerages that are expected to release their earnings this week. Morgan Stanley Dean Witter (MSD) scheduled to report on Wednesday and Lehman Brothers (LEH) is due on Thursday. 
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Goldman Sachs
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