Goldman Sachs Blows Past Estimates; Shares Move Higher

Goldman Sachs shattered muted analyst expectations for earnings despite a substantial drop from last year, sending its shares higher in pre-market trading on Tuesday.

The Goldman Sachs booth on the floor of the New York Stock Exchange
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The Goldman Sachs booth on the floor of the New York Stock Exchange

Goldman delivered second-quarter earnings excluding items of $1.78 per share, down 4 percent from $1.85 per share in the year-earlier period. Revenue was $6.63 billion, a decrease from $7.28 billion a year ago.

Analysts had expected the company to report earnings excluding items of $1.12 per share on revenue of $6.41 billion, according to Thomson Reuters.

But estimates had been falling aggressively, with Wells Fargo putting its target all the way down to 85 cents.

Concerns had been focused on the effects the European debt crisis was having on Goldman as well as the declining demand for investment banking services.

Indeed, investment banking net revenue at 1.2 billion fell 17 percent from the the same period in 2011. Financial advisory profits fell 26 percent and underwriting dropped 9 percent year over year.

On the plus side, fixed income, currency and commodities client execution surged 37 percent to $2.19 billion, while investment management grew 5 percent annualized and 13 percent from the prior quarter to $1.33 billion.

"During the second quarter, market conditions deteriorated and activity levels for both corporate and investing clients were lower given continued instability in Europe and concerns about global growth," CEO Lloyd C. Blankfein said in a statement. "Still, we remain focused on meeting our clients' needs, while prudently managing our capital, liquidity and risk."

Compensation for the company's 32,300 employees has fallen 9 percent over the past year to average $90,247, the company said. Goldman has cut 3,300 employees.

Goldman shares have fallen 25 percent over the past year though they have gained nearly 2 percent over the past month as the company's peers have fallen 7.5 percent.

After the announcement, shares of the company rose 2.5 percent in pre-market trading.Get real-time quotes for Goldman Sachs here.

Goldman's investment in Industrial and Commercial Bank of China Ltd resulted in a $194 million loss during the quarter. Other public equity investments lost $112 million, and overall its lending and investing division reported an 81 percent decline in net revenue, to $203 million from over $1 billion a year earlier.