The financial sector was one of the hardest-hit sectors last year because the near-zero interest rate environment and the COVID-19 pandemic hurt lenders’ revenues. While the interest-rate environment remains unchanged, the sector is now recovering on the back of a rebounding economy. Indeed, the global financial services market is expected to grow at a 9.9% CAGR to $22,515.17 billion in 2021.
Investors’ interest in the financial sector is evidenced by the Financial Select Sector SPDR ETF’s (XLF) 19.9% gains over the past three months compared to the SPDR S&P 500 ETF Trust’s (SPY) 7.2% returns. Adding to the positives, the Federal Reserve has given big banks clearance to resume their capital deployment activities.
So, with these factors in mind, we think it could be wise to bet on established financial companies. The Goldman Sachs Group, Inc. (GS), Lazard Ltd (LAZ), Piper Sandler Companies (PIPR), and Cowen Inc. (COWN). These companies have market dominance and reported impressive results in their last reported quarters.
The Goldman Sachs Group, Inc. (GS)
GS is an established financial institution that provides a range of financial services to corporations, financial institutions, governments, and individuals worldwide It operates through four segments—Investment Banking, Global Markets, Asset Management, and Consumer & Wealth Management.
On April 13, the firm announced that it intends to expand its footprint in the U.K. by opening a new office in Birmingham. Richard Gnodde, GS’ CEO, said that, “Establishing a new office in Birmingham will diversify our U.K. footprint and give us access to a broad and deep talent pool in the local area. We see tremendous opportunity to enhance our U.K. presence and continue delivering for our global clients.”
GS’ net revenue increased 102% year-over-year to $17.70 billion for fiscal first quarter ended March 31, 2021. The company’s pre-tax earnings grew 518% year-over-year to $8.30 billion, while its EPS came in at $18.60, up 498% year-over-year.
For the quarter ending June 30, analysts expect GS’ EPS and revenue to increase 1,679.2% and 22.9%, respectively year-over-year to $9.43 and $11.98 billion. It surpassed the Street’s EPS estimates in three of the trailing four quarters. The stock has gained 100.6% over the past year and closed yesterday’s trading session at $357.62.
GS’ POWR Ratings reflect this promising outlook. The company has an overall B rating, which translates to Buy in our proprietary ratings system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
The stock has a B grade for Value, Growth and Sentiment. Within the A-rated Investment Brokerage industry, GS is ranked #9 of 24 stocks.
To see all the POWR Ratings for GS (Stability, Momentum and Quality), click here.
Lazard Ltd (LAZ)
Based in Hamilton, Bermuda, LAZ, together with its subsidiaries, operates as a financial advisory and asset management firm. It operates across America, Europe, Asia and Australia. The company offers various financial advisory services that include mergers and acquisitions, capital advisory, restructurings, shareholder advisory, sovereign advisory, capital raising, and other strategic advisory matters.
On April 29, 2021, LAZ announced the expansion of its alternative investment platform with the addition of a long/short equity team focused on the technology, media, and telecommunications (TMT) industries. This is expected to further solidify its market dominance in the investment space.
LAZ’s net revenue increased 23% year-over-year to $660.10 million for the first quarter ended March 31 Its operating income grew 60% year-over-year to $134.29 million, while its net income increased 56% year-over-year to $90.83 million. Also, its EPS came in at $0.75, up 34% year-over-year.
Analysts expect LAZ’s EPS to come in at $0.97 for the quarter ending September 30, which represents a 44.8% year-over-year increase. It surpassed consensus EPS estimates in three of the trailing four quarters. Its revenue is expected to increase 29.9% year-over-year to $653.03 million for the current quarter, ending June 30. The stock has surged 47.4% over the past nine months and closed yesterday’s trading session at $46.02.
LAZ’s POWR Ratings reflect solid prospects. It has a B grade for Quality. To see the additional POWR Ratings for LAZ (Growth, Value, Momentum, Stability and Sentiment), click here.
It is ranked #11 in the same industry.
Piper Sandler Companies (PIPR)
PIPR is an investment bank and institutional securities firm that serves corporations, private equity groups, public entities, non-profit entities, and institutional investors internationally. It offers investment banking, institutional sales, trading, and research services for various equity and fixed-income products.
The company served as lead financial advisor to Bain Capital Private Equity and Cinven in February on their joint acquisition of Lonza Specialty Ingredients. This reflects PIPR’s strong market position in the European investment banking market.
PIPR completed the acquisition of TRS Advisors on December 31. TRS Advisors and its senior bankers have been integral to some of the most complex restructuring transactions in public, private, and government settings. This is expected to accelerate the company’s growth.
Its adjusted net revenue increased 69% year-over-year to $413.80 million for the first quarter, ended March 31 Its adjusted net income increased 197% year-over-year to $75.50 million. Also, its adjusted EPS increased 179% year-over-year to $4.13.
Analysts expect PIPR’s EPS and revenue to increase 44% and 17.5%, respectively, year-over-year to $2.78 and $343.90 million for the quarter ending June 30. It surpassed the Street’s EPS estimates in each of the trailing four quarters. The stock has soared 132.4% over the past year and closed yesterday’s trading session at $118.91.
It’s no surprise that PIPR has an overall A rating, which equates to Strong Buy in our POWR Ratings system. The stock has a B grade for Growth, Sentiment, Value and Quality.
Click here to see PIPR’s ratings for Momentum and Stability as well. PIPR is ranked #3 in the Investment Brokerage industry.
Cowen Inc. (COWN)
COWN, along with its subsidiaries, provides investment banking, research, investment management services, prime brokerage, global clearing, securities financing, commission management, and sales and trading internationally. It operates through two segments: Operating Company and Asset Company. The company also offers capital raising and strategic advisory services for public and private companies.
COWN launched a new algorithmic trading solution—the Inaccessible Liquidity Adjustment—in March to address fundamental shifts in the U.S. market structure and help clients accurately navigate the ever-evolving investment landscape. This is expected to help the firm increase its client base.
COWN’s non-GAAP revenue increased 226% year-over-year to $687.40 million for the first quarter, ended March 31. The company’s non-GAAP net income came in at $145.60 million versus a $7.10 million loss in the prior-year period. Its non-GAAP EPS came in at $4.34 compared to a $0.25 loss in the year-ago period.
For the quarter ending September 30,analysts expect COWN’s EPS to come in at $1.27, which represents a 1.6% year-over-year increase. It surpassed consensus EPS estimates in each of the trailing four quarters. The company’s revenue is expected to increase 11% in fiscal 2021 to $1.80 billion. The stock has gained 291.9% over the past year and closed yesterday’s trading session at $41.42.
COWN’s strong fundamentals are reflected in its POWR Ratings. It has a B grade for Value. We have also graded COWN for Momentum, Growth, Stability, Sentiment and Quality. Click here to access all COWN’s ratings.
COWN is ranked #14 in the same industry.
Want More Great Investing Ideas?
GS shares were trading at $360.56 per share on Thursday afternoon, up $2.94 (+0.82%). Year-to-date, GS has gained 37.26%, versus a 11.59% rise in the benchmark S&P 500 index during the same period.
About the Author: Nimesh Jaiswal
Nimesh Jaiswal's fervent interest in analyzing and interpreting financial data led him to a career as a financial analyst and journalist. The importance of financial statements in driving a stock’s price is the key approach that he follows while advising investors in his articles. More...
More Resources for the Stocks in this Article
|Ticker||POWR Rating||Industry Rank||Rank in Industry|
|GS||Get Rating||Get Rating||Get Rating|
|LAZ||Get Rating||Get Rating||Get Rating|
|PIPR||Get Rating||Get Rating||Get Rating|
|COWN||Get Rating||Get Rating||Get Rating|