BlackRock & Goldman Sachs Beat Q3 Expectations and Post Record AUM

BlackRock and Goldman Sachs both surpassed Q3 earnings expectations and achieved record assets under management (AUM), signaling robust performance in the asset management sector. BlackRock reported Q3 sales of $6.5 billion and EPS of $11.55, with AUM reaching $13.5 trillion, while Goldman Sachs posted Q3 sales of $15.18 billion and EPS of $12.25, with AUM hitting $3.45 trillion. Both firms benefited from strong inflows across asset classes and strategic positioning in high-growth areas like passive investing and digital finance, though BlackRock's stock rose 3% post-announcement while Goldman Sachs saw a 2% dip, attributed to profit-taking.

Analysis

BlackRock (BLK) and Goldman Sachs (GS) significantly exceeded Q3 earnings expectations, driven by strong inflows and strategic positioning in passive investing and digital finance. BlackRock reported Q3 sales of $6.5 billion (+25% YoY) and EPS of $11.55, beating estimates by 3%. Goldman Sachs posted Q3 sales of $15.18 billion (+19% YoY) and a 46% surge in EPS to $12.25, exceeding estimates by 10%. BLK shares rose over 3% post-announcement, while GS dipped 2%, likely due to profit-taking after its +37% YTD performance.

Both firms achieved record Assets Under Management (AUM), underscoring robust growth. BlackRock's AUM expanded 17% YoY to $13.5 trillion, maintaining its global leadership. Goldman Sachs also reached a new AUM peak of $3.45 trillion, an 11% YoY increase, solidifying its top-10 position. This AUM growth reflects effective capital attraction and management strategies.

Goldman Sachs presents a notable valuation discount at 16X forward earnings compared to BlackRock's 24X and the S&P 500's 25X. GS also trades below 2X forward sales, significantly lower than BLK's 8X. In terms of capital returns, GS offers a 2.03% dividend yield, slightly edging out BLK's 1.8%, with both outperforming the S&P 500 average.

Despite current Zacks Rank #3 (Hold) for both, Goldman Sachs' strong Q3 EPS beat suggests potential for upward earnings estimate revisions. This could lead to a "buy" rating for GS in the near term, indicating a more favorable outlook on certain metrics compared to BLK. Both firms remain viable investments within the financial sector.

Key Decisions for Investors

• Investors should consider Goldman Sachs (GS) for potential upside given its significant Q3 EPS beat and attractive valuation metrics relative to BlackRock (BLK) and the broader market.
• Monitor earnings estimate revisions for GS, as an upgrade to a "buy" rating is anticipated following its strong performance.
• Evaluate both BLK and GS for their consistent AUM growth and strategic positioning in high-growth areas, recognizing BLK's premium valuation and GS's relative discount.