As talked about last week in the JPMorgan (JPM) and Citigroup (C) earnings preview, the tailwinds surrounding the financial system at this point in 2025, should results in pretty good financial results when Q3 ’25 financial results are reported this coming week, particularly for the bigger banks, with trading desks.
The big tailwind for Goldman Sachs (GS) and Morgan Stanley (MS) is expected to be the resurgence in M&A in ’25, particularly around AI and all the deals which have seemed to pop up on a weekly basis the last 3 months.
A note out of Jeffries last week estimated that Goldman’s Q3 ’25 advisory fees will be $1.356 billion (up 55% y-o-y), while Morgan Stanley’s fees will increase 30% y-o-y to $710 million. Jeffries estimates that total investment banking (IB) fees to grow 29% y-o-y at GS, and 24% y-o-y at MS. JPMorgan is expected to 3rd line in terms of y-o-y growth, similar to Bank of America.
Goldman Sachs:
Goldman Sachs reports their 3rd quarter ’25 financial results before the opening bell on Tuesday, October 14th, 2025. Analyst consensus coming into Tuesday morning’s release is for $11 billion (even) in net revenue and $10.99 in EPS, for expected y-o-y growth of 11% and 31% respectively.
The challenge for Goldman Sachs is that – like JPM – referenced above – the 4th quarter of ’24 represents a tough compare for the investment bank, given that in Q4 ’24, GS printed a 49% upside surprise in EPS ($11.95 vs $8.04) while revenue’s surprise was 15% ($13.87 bl, vs $12.07 bl).
A 49% EPS upside surprise during a bull market for a major trading and banking firm like GS is huge, but still not as amazing as the 15% upside surprise in revenue.
Q2 ’25 as readers might expect was a strong quarter for GS, as net revenue grew 15%, and EPS grew 27% y-o-y.
Valuation: To best understand GS, we have to look at historical numbers for the banking giant. Even though the after-math of 2008 saw Goldman spin-off it’s proprietary trading unit, the firm still does some of that although the broker remains the premier white-shoe investment bank. During the 2020 – 2021 COVID crisis, as of the end of 9/30/21, Goldman’s trailing-twelve month (TTM) EPS was $60 per share. EPS grew 92% that year on the back of zero interest rates and the SPAC/bitcoin/crypto explosions, and the stock ended the year with a 6x multiple, peaking at $426 per share in November ’21 and then trading all the way down to $278 by the summer of ’22.
In Q3 ’25, if Goldman hits their Q3 ’25 EPS estimate, the TTM EPS will be $47.97 exactly, with an estimated EPS growth in ’25 of 16%, and the stock trading with a 17x multiple. The stock recently hit $825 per share but has sold off pre-earnings, and after Friday’s, October 10th, China tariff scare.
The point is the stock is 2x higher than it was in late 2021, on an TTM EPS figure that is 20% lower than “peak EPS” in November ’21.
It just goes to show readers that Fed liquidity is far more important than almost any other positive fundamental aspect to EPS for the brokerage and big bank stocks.
My biggest concern over GS the last 3 – 5 years is the lack of any real progress in their asset management business. If you look at the former discount brokers like Schwab and Fidelity, and even the big banks like Blackrock and JPMorgan, their assets-under-management growth has been far superior to Goldman’s, and for that reason, clients own very little of the stock, and this blog missed this latest run in the stock from late 2024. (This blog post on GS from October ’24 didn’t age well, but the banking business has helped the stock.)
Morgan Stanley:
Morgan Stanley consensus for Wednesday morning’s October 15th, 2025, expected earnings release is $16.7 billion in revenue and $2.10 in EPS, for expected y-o-y growth of 9% and 12% respectively. In the 2nd quarter, MS printed 12% and 17% respectively, and made the oft-quoted comment this past quarter on their conference call that “the investment banking (IB) pipeline was potentially the strongest in the last 5 years.”
While Morgan Stanley’s banking business is 2nd to Goldman Sachs, what Morgan Stanley has done better the last 10 – 15 years is grow the Wealth Management (WM) business and assets-under-management. If you look at the wealth management revenue line on the respective income statements for both Goldman and Morgan, there is no question Morgan Stanley is generating better revenue growth from the WM business than GS. Goldman has shown some growth, but it’s much slower y-o-y revenue growth Morgan’s wealth management segment growth.
Goldman’s WM revenue is roughly 30% of net Goldman’s total net revenue while Morgan Stanley’s is approximately 48%.
Today, Morgan Stanley is trading at 17x 2025 expected EPS growth of 13%, so neither stock is expensive on a PE basis, but given the cyclicality of their earnings – particularly Goldman’s with the IB business, and trading revenue, and the smaller wealth management business, Morgan Stanley is better positioned for down-cycle revenue and EPS growth, at least in terms of stock volatility.
The fact is – for anyone who has modeled the brokerage stocks as long as I have (and that includes Lehman in the late 1990’s) – the stocks trade at their cheapest near the peak of the underwriting and banking cycles, much like the semiconductor stocks trade at their cheapest near the peak of the tech cycles (and I’m thinking of Micron Technology in particular).
The fact that Goldman’s stock has doubled from the late ’21 highs, while EPS (on a TTM basis) is still 20% lower makes me a little more cautious on Goldman than Morgan Stanley.
Summary / conclusion: Given the secular bull market being on it’s 15th year, and the overbought nature of stocks in the last 30 days, it’s easy to say “wait for Goldman Sachs to cheapen up” before adding, but this is the strongest 90 day period for stocks and November each year is the best historical return of any month of the year, so readers might have to decide if you want to trade here or be a long-term investor.
Gun to the head (as the old expression goes) if someone asked me which stock would you own for a 3 to 5 year time period starting today, it would be Morgan Stanley, since you still get favorable market cycle “alpha” with Morgan Stanley’s #2 position in the investment banking and advisory business, with the stability of the growing wealth management business in bear market down cycles.
Fair value is difficult to determine since we don’t know how long the bull market lasts, i.e. another 1,2 or 3 years, if not longer.