The Goldman Sachs Group Inc. (NYSE:GS) is set to report FQ1 2014 earnings before the market opens on Thursday, April 17th. Banks make the big bucks when the economy grows and businesses and individuals take on loans to fund expansion, but this quarter investors have displayed a squeamish risk appetite. The caution may be the result of the Fed's decision to taper and increasing concerns over the growth rate of the Chinese economy as well as smaller emerging markets.
So far this earnings season has been a mixed bag for the financials. Citigroup (NYSE:C) and Wells Fargo (NYSE:WFC) both posted better earnings reports than expected but JPMorgan Chase (NYSE:JPM) missed estimates badly. Wall Street has set the bar much lower than usual this earnings season for Goldman Sachs. This quarter Wall Street expects Goldman to report a year-over-year EPS decline of 20% and a yoy revenue decrease of 12%. Here's what investors expect from Goldman Sachs on Thursday.
The current Wall Street consensus expectation is for Goldman Sachs to report $3.43 EPS and $8.850B revenue while the current Estimize.com consensus from 35 Buy Side and Independent contributing analysts is $3.81 EPS and $9.060B in revenue. This quarter the buy-side as represented by the Estimize.com community is expecting Goldman Sachs to beat the Wall Street consensus on both the top and bottom line by a significant margin.
Over the past six quarters the consensus from Estimize.com has been more accurate than Wall Street in forecasting Goldman Sachs' EPS and revenue 5 times each. By tapping into a wider range of contributors including hedge-fund analysts, asset managers, independent research shops, students and non professional investors Estimize has created a data set that is more accurate than Wall Street up to 69.5% of the time, but more importantly it does a better job of representing the market's actual expectations.
The magnitude of the difference between the Wall Street and Estimize consensus numbers often identifies opportunities to take advantage of expectations that may not have been priced into the market. In this case we are seeing a moderate difference between the two groups' expectations.(click to enlarge)
The distribution of estimates published by analysts on the Estimize.com platform range from $3.25 to $5.50 EPS and from $7.500B to $10.000B in revenues. This quarter we're seeing a larger distribution of estimates than usual for Goldman Sachs.
The size of the distribution of estimates relative to previous quarters often signals whether or not the market is confident that it has priced in the expected earnings already. A wider distribution of estimates signaling less agreement in the market could mean more volatility post earnings. (click to enlarge)
Over the past 4 months the Wall Street EPS consensus fell from $3.84 to $3.43 while the Estimize consensus increased slightly from $3.77 to $3.81. Meanwhile the Wall Street revenue consensus surged before falling dramatically from a high of $9.444B to $8.850B while the Estimize forecast also rose then fell, falling to $9.060B. Timeliness is correlated with accuracy and downward analyst revisions at the end of the quarter are often a bearish indicator.(click to enlarge)
The analyst with the highest estimate confidence rating this quarter is turbinecity who projects $3.58 EPS and $8.986B in revenue. turbinecity was our Winter 2014 season winner and is ranked 6th overall among over 4,000 contributing analysts. Over the past 2 years turbinecity has been more accurate than Wall Street in forecasting EPS and revenue 59% and 55% of the time, respectively. Estimate confidence ratings are calculated through algorithms developed by deep quantitative research which looks at correlations between analyst track records and tendencies as they relate to future accuracy. In this case turbinecity is expecting Goldman Sachs to beat Wall Street's expectations but fail to live up to the Estimize consensus.
Earnings are expected to drop compared to last year but the Estimize consensus is much higher than Wall Street's. This quarter contributing analysts on the Estimize.com platform expect Goldman to beat the Street's consensus by 38 cents EPS and nearly $210 million in revenue.