GOLDMAN SACHS (GS)
Are they the smartest guys in investment banking? Many would argue yes. Mergers & acquisitions advice, asset management, market making, and a reputation for astute market calls for both clients and in trading its own capital.
Reports Q1 earnings Tuesday 3/18 at approx. 830a. Conference call at 11a.
WHAT WILL MOVE THE STOCK:
FOCUS ON THE BALANCE SHEET - So far, Goldman Sachs has avoided the mark-to-market nightmares that have plagued some other financial firms. Will Goldman dodge the bullet again? Theflyonthewall.com says analysts expect a writedown of up to $3.5 billion. If the Street likes what it hears, Goldman (and other financials) could continue to rebound from their Monday lows. Can you say, "dead cat bounce?"
DID GOLDMAN GET IT RIGHT? - Last quarter Goldman made a pile of money betting correctly on the direction of the credit crisis. Did they repeat this quarter or did they get caught on the wrong side of the trade?
UGLY PROFIT NUMBERS? - Not a big deal either way. An earnings miss by Goldman or Lehman may not mean much for their stocks. Most analysts haven't updated their EPS forecasts in more than a week even though there have been significant developments with Bear Stearns, etc. Besides, the spot light is on writedowns and the outlook. Speaking of which...
Q2 OUTLOOK - So what next? One of the market stories of Monday was the huge unleveraging of risky/complex positions. Will this lead to less trading for everyone or just the "problem" firms.
Q1 Estimates: EPS down 61% to $2.58, revenues down 41% to $7.472 billion
Q2 Estimates: EPS down 12% to $4.33, revenues down 4% to $9.802 billion
FY 08 Estimates: EPS down 31% to $16.96, revenues down 17% to $38.353 billion
Source: Thomson Financial
Year-ago actuals: Q1 EPS $6.67, Rev. $12.730 billion
*All estimates are current as of 3/17 and subject to change.*
UBS DOWNGRADE - Monday morning, UBS downgraded six financial services firms, including Goldman and Bear Stearns, to "neutral" from "buy."
WINNING STREAK IN JEOPARDY? - Goldman has beat or met the consensus earnings estimate every quarter since the second quarter of 2005 -- a winning streak of ten consecutive quarters.
BEAR STEARNS NEWS = 21-MONTH GS LOW - In the wake of the Bear Stearns news, Goldman shares fell to $140.27 -- the lowest since July 2006. However, the stock rebounded in afternoon trading and closed at $150.91, down just 3.7% on the day.