Q4 Preview: Weak Trading Numbers May Hamper Goldman Sachs (GS) Earnings Results


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The Goldman Sachs Group, Inc. ( GS ) is lower today, ahead of the company's fourth quarter earnings release, expected out after the market closes today. Shares are down0.3% today.

Goldman is expected to report EPS of $3.79 with revs of $9.0 billion. Last quarter, the New York, NY-based financial firm reported EPS of $2.98 on revs of $8.9 billion, topping the consensus. Looking at Q409, we see than GS produced EPS of $8.20 on revs of $9.615 billion, benefiting from a lower compensation expense.

Shares of the company gained 8.7% through the quarter, to $146.76 at the end of December. The stock is 3.1% since the end of the quarter, and ended 2010 12.9% better.

GS shares are currently trading for a forward P/E of 9.9x FY11 EPS estimates, relatively cheap when compared to 10.1x for Bank of America ( BAC ), 11.1x at Citi ( C ) and 11.6x at Wells Fargo ( WFC ).

Data from Bloomberg has 18 analysts with a Buy on GS, 9 with a hold, and none suggesting to Sell. The analyst price target average is $155.50, with a high of $170 and low of $137.

J.P. Morgan is expecting an EPS of $4.08. Investment banking revs are expected to be 5% lower in the quarter, from $6.9 billion to $6.5 billion. Fixed income revs are expected to be $3.4 billion, and equity should come in at $1.8 billion.

JPM has an overweight rating with a $175 price target on the shares.

Deutsche Bank likes the risk/reward ratio heading into FY11 given "improving macro data points / capital market trends, increased regulatory clarity / capital deployment opportunity, H111 seasonality, and valuations." They note that capital markets were generally weaker than expected despite overall strength in equity markets. Deutsche believes that FICC trading will be offset by IB. Deutsche expects investors to focus more on the outlook rather than the quarterly numbers.

DB also lists some potential catalysts for FY11: "1) A pick up in M&A activity given a fertile environment (tons of cash, challenging top line growth, and more policy clarity); 2) A healthy underwriting backlog and good market levels; 3) Improving investor confidence should bode well for trading activity; 4) Potential capital deployment with regulatory clarity; 5) Less regulatory drag with increased clarity on rules and congressional shift; and 6) Some stock specific catalysts (GS capital & MS market share/margins)."

Deutsche has a Buy on the shares, and $210 price target.

Keefe, Bruyette & Woods is looking for an EPS of $3.65. They currently have an Outperform on the shares, with a $210 price target.

Goldman Sachs is expected to release their Q410 earnings on Wednesday, January 19, 2011, at approximately 7:00am EST. Stay tuned to StreetInsider.com's EPS Central section to see our analysis of the highly-anticipated quarterly results withi0 n seconds of their release.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Investing , Stocks
More Headlines for: BAC , C , GS , WFC

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