Goldman Sachs’ Earnings Double

Times are great in some spots of the US economy. Inflation may be a worry, and oil prices may be crushing the exurban commuter, but for guys on Wall Street, happy days are here again. Goldman Sachs, the investment bank, just announced that it had doubled its earnings to $2.4 billion, or $4.97 a diluted share, for the second quarter of 2006. It’s not as much as Exxon Mobil’s results, but it beats a poke in the eye with a sharp stick.

Goldman was expected to pull in $4.28 a share, according to earnings tracker Thomson Financial. This represented a consensus view of analysts who are paid huge sums to make these sorts of educated guesses. Missing by 50 cents a share isn’t much to crow about, but no one is going to get fired over this. After all, the company exceeded expectations, so the people holding the stock get an extra boost from the analysts’ miss. Had the company come in under the analysts’ view, well, unpleasant doesn’t begin to describe it.

Goldman’s result comes on the heels of Lehman Brothers’ financial results, which came out on Monday. While not as spectacular, second-quarter earnings at Lehman were $1 billion, or $1.69 a share, up from $683 million, or $1.13 a share, in the same period prior year. Wall Street expected $1.60 a share.

Breaking Goldman’s results down, investment banking revenues hit $1.53 billion in the second quarter of 2006 – up from $815 million last year. Total revenues from its trading and principle investments group climbed to $6.96 billion in the second fiscal quarter of 2006 from $2.81 billion in the same period last year.

What all of this means is that, despite all the worries about oil, interest rates and terrorism, the financial sector in the US is healthy and wealthy. Whether the folks in it are wise remains to be seen, as any idiot can make money when things are booming. Further positive results for investment banks who have yet to report will merely underscore the overall health of this part of the US economy.

© Copyright 2006 by The Kensington Review, Jeff Myhre, PhD, Editor. No part of this publication may be reproduced without written consent. Produced using Fedora Linux.

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