With shares down about 10% over the last 3 months, what must you know about Goldman Sachs as the firm reports earnings on Thursday morning?
Here’s a synopsis of important points, compliments of CNBC’s Mary Thompson.
Goldman is set to cap a banner year with a strong fourth quarter. Free from the drag of a consumer business, it’s benefiting from a better trading environment and a pickup in M&A activity.
Because of a shift in its fiscal year there are no comparisons from last years fourth quarter, but analysts from Thompson forecast the company earned 5.22 a share on revenue of $9.7 billion.
Analysts say an estimated 60% increase in M&A advisory fees and modest, single digit sequential increases in equity & debt underwriting, and equity trading revenue all contributed to strong fourth quarter results.
However, fixed income, commodities and currencies or FICC was Goldman's weak spot last quarter. Analysts at Macquarie forecast a 23% decline in revenue from the third quarter.
The question on everyone’s mind though is -- what about the bonuses? Through the third quarter, Goldman set aside $16.7 billion dollars and some reports estimate the average employee bonus will be $595,000 for 2009.
The pool of bonus funds estimated to almost double from last year to a record $20.3 billion is a sore subject for many in Washington who feel Goldman and its rivals are thumbing their noses at Main Street with big bonuses -- bonuses some believe were made possible solely because of the taxpayer funded bailout in 2008.
What’s the Goldman trade?
It wouldn't surprise me if Goldman surprises to the upside, says Guy Adami. However, what the stock does is anyone's guess. It's been a wildcard.
If the Vix begins to rise I'd be a buyer of Goldman. As volatility rises they should make money. But if the Vix stays low I'd stay away from Goldman.
I'm bullish Goldman regardless of what happens in the Vix, counters Pete Najarian. I just think the stock trades too cheap. They make a lot of money and if it gets a lot cheaper I think they go private.
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Trader disclosure: On January 21st, 2010, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Adami Owns (AGU), (C), (GS), (INTC), (MSFT), (NUE), (BTU); Finerman's Firm Is Short (IJR), (MDY), (SPY), (IWM), (USO), (UNG); Finerman Owns (AAPL); Finerman's Firm Owns (ACL), (CLX), (MSFT), (TGT), (WMT); Finerman's Firm And Finerman Own (WFC) Preferred; Finerman's Firm Owns (BAC), (BAC) Leaps; Finerman Owns (BAC), (BAC) Preferred; Finerman's Firm And Finerman Own (CVS); Finerman's Firm And Finerman Own (GOOG); Najarian Owns (CLF) Call Spread; Najarian Owns (HUM) Call Spread; Najarian Owns (INTC) Calls; Najarian Owns (MS); Najarian Owns (PFE); Najarian Owns (CIEN) Calls; Najarian Owns (STX) Call Spread; Najarian Owns (MRVL), Is Short (MRVL) Calls; Najarian Owned (INTC) Calls Today; Terranova Is Short (CMA), (ICE), (ESS), (JCI), (CAL), (AGU); Terranova Owns (BAC), (JPM), (XOM), (FTO), (FCX), (EMC), (AAPL), (DELL), (MSFT), (QCOM); Terranova Owns (XHB) March Puts; Terranova Owns (POT) February Puts
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