Here's what all the major analysts expect from Goldman Sachs' earnings Tuesday

Published Mon, Oct 16 20232:25 PM EDT

Analysts expect yet another lackluster quarter for Goldman Sachs , but are not ready to turn away from the stock. The bank is scheduled to report its third-quarter earnings on Tuesday before the market opens. Analysts expect earnings per share of $5.31 and net revenue of nearly $11.19 billion, according to estimates from LSEG. That would result in a 36% decline from Goldman's $8.25 per share profit, as well as a slight revenue decline, from the same period last year. Gloomy results would follow a series of quarterly losses for Goldman. The bank previously reported a 58% decline in second-quarter profits tied to hefty write-downs in commercial real estate and losses related to the sale of its GreenSky fintech lending unit, and an 18% decline in earnings for the first quarter tied to a hit in sale of consumer loans. The New York-based bank has also suffered quarterly declines in trading and investment banking as slower client activity drags on amid broader economic uncertainty and higher interest rates. Shares are trading 1.9% higher on Monday. Near-term options imply a roughly 4.4% move for the stock on earnings day, according to FactSet. GS YTD mountain Goldman Sachs stock. What the analysts think Barclays analyst Jason Goldberg views Goldman as a longer-term play, expecting the bank's third-quarter earnings to still reflect headwinds from commercial real estate and lower trading revenue before capital markets activity picks up. The bank is beginning to see increased movement in investment banking — particularly in equity capital markets and M & A — with the rise of IPOs, Goldberg said in a note earlier this month. While investment banking fees likely increased throughout the previous quarter, he expects more "pronounced improvement" in the fourth quarter into 2024. "We believe GS is well positioned to benefit from positive secular capital markets related trends (trading benefiting from volatile markets). Its recent revenue initiatives and focus on durable revenues should benefit results and its multiple over time," Goldberg said. The analyst maintained his overweight rating and $437 price target on the stock, suggesting shares could gain 41.3% from Friday's close. Jefferies similarly expects a muted quarter for Goldman, forecasting $5.09 per share in third-quarter earnings. This marks the seventh consecutive quarter where the firm lowers its estimates due to lower investment banking and sales & trading activity, analyst Daniel Fannon wrote. Still, Jefferies said it likes Goldman in the short term. Ongoing traction around new initiatives in transaction banking and wealth management, as well as increasing capital markets activity throughout the second half of 2023, add to the firm's $387 base case price target. That forecast implies upside of 25%. "GS continues to meet or exceed projected milestones in its medium-term strategic goals, leading to multiple expansion," Fannon wrote. Bank of America, meanwhile, sees Goldman Sachs as a bank "operating with a healthy capital cushion and offering a particularly attractive risk/reward." Analyst Ebrahim Poonawala noted that stronger capital markets activity could uplift the stock. Downside risks could also weigh on the bank, however, as the analyst included weaker economy and capital markets, macro or geopolitical issues, tougher global regulation among various risk factors. Poonawala trimmed his third-quarter earnings estimate to $4.97 per share from $6.79 recently. He maintained a buy rating, however, and a price target of $388 per share. Goldman's GreenSky sale Wells Fargo analyst Mike Mayo is more downbeat on Goldman's earnings, but he thinks the bank's decision to sell GreenSky will improve the bank's outlook and help it return to its roots of "leveraging its historical strengths." He reduced his third-quarter earnings estimates to $5.04 on news of the GreenSky sale. Goldman announced Wednesday that it agreed to sell the fintech lending platform to a group of investors led by private equity firm Sixth Street. The deal will result in a 19 cents per share reduction to the bank's third-quarter earnings, Goldman said. "The sale should help in several ways. First, it eliminates a distraction for management and helps refocus the franchise. Second, it should reduce on-B/S risk weighted assets. Third, it may help future profitability if Greensky was operating at a loss within GS," Mayo wrote in a recent note. The sale should also reduce Goldman's exposure to the U.S. consumer at a time when lower-end consumers may be weakening, he added. Wells Fargo is overweight on the stock and kept its $390 price target on shares — which implies upside of 26%.