By: Todd McDonald, Analyst
Goldman Sachs (GS) is scheduled to report 2Q2013 earnings before the opening bell on Tuesday, July 16. The firm indicated it would provide a press release at 7:30 a.m. EST and follow with a conference call at 9:30 a.m. Please note that, in past reporting periods, Goldman Sachs reported earnings approximately 15 minutes ahead of the scheduled release time. Goldman's results also have the potential to impact the financial sector as well as the broader market gauges, particularly the index futures, given the investment bank's influence.
Outliers & Strategy
- Earnings Per Share: Goldman Sachs typically provides a "clean" number that is comparable to consensus. The current Street estimate is $2.82 with a range of $2.55 to $3.17. (Source: Yahoo! Finance)
- Revenues are seen coming in at $7.9 bln, an increase of 20.50% from 2Q2012. The range is $7.65 bln to $8.74 bln.
- Sympathy Plays: Morgan Stanley (MS), Jefferies (JEF), Lazard (LAZ), and Barclays (BCS). Also, be sure to watch the relevant ETFs, such as Financial Select Sector SPDR (XLF) and Direxion's leveraged ETFs (FAS3x bull) and (FAZ3x bear).
- Implied Volatility: The average price move off earnings in Goldman Sachs shares is 2.59%. The options markets are implying a 2.88% move one day after earnings are disseminated.
- 07/12: JPMorgan Chase (JPM) reported earnings per share of $1.60, and revenues of $25.2 bln, both of which were better than analyst estimates. The earnings release sent the financial sector marginally higher on Friday, July 12.
- 07/09: According to a post on StreetInsider.com, financial regulators have imposed new leverage ratios on the major US financial institutions, raising the capital leverage ratio from 3% to 5% of assets. A post on Benzinga.com indicates that Goldman Sachs would need to raise about $5 bln in capital to meet the new requirements. The bank would have to do one or more of the following to comply with the new regulations: sell assets, decrease or eliminate payout ratio, or decrease share buybacks.
- 06/26: Atlantic Equities reiterated its Neutral rating on Goldman Sachs, citing a forecast for decreased revenues in investment banking and trading, according to a post on Benzinga.com. The firm cut its EPS estimates to $2.70, $0.10 below consensus.
Goldman Sachs shares have reclaimed the 50-day SMA, bouncing off of old resistance near $150. The stock has outperformed the S&P 500 substantially in 2013, rising approximately 25% YTD versus the (SPY) increase of 18.73%. If earnings results surprise to the upside, look for initial resistance at $165, followed by the recent highs of $168.20. If results disappoint, the first target for support should be near the aforementioned $150, followed by $142.50. (Chart courtesy of StockCharts.com)
Goldman Sachs shares have benefitted greatly from a strengthening US economy and improving lending standards. Although there have been new capital standards imposed on the largest US banking institutions, the price action of the industry has remained positive, indicating the downbeat news was already priced in. Therefore, the Street is most likely pricing in a solid report. Look for earnings and revenues well above consensus to push shares significantly higher. Anything less would be seen as a disappointing report.
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