Earnings Preview: Goldman Sachs

Jul.11.12 | About: Goldman Sachs (GS)

The Goldman Sachs Group, Inc. (GS) provides investment banking, securities, and investment management services, as well as a range of financial services to corporations, financial institutions, governments and high-net-worth individuals worldwide. Its Investment Banking segment offers financial advisory services, including advisory assignments with respect to mergers and acquisitions, divestitures, corporate defense, risk management, and restructurings and spin-offs; and underwriting activities comprising public offerings and private placements of a range of securities, loans and other financial instruments, and derivative transactions.

It is scheduled to report its Q2 2012 results on July 17, 2012, before the market opens. In this article I will recap the historical results of the company, latest EPS estimates vs. surprises, latest developments and closest competitors' development.

Technical Overview


The stock has a market capitalization of $46.47B and is currently trading at $94.47 with a 52 week range of $84.27 - $139.25. The stock performance year to date: 5.28%. It is currently trading below 20, 50 and 200 SMA.

Key Metrics

  • Trailing P/E: 13.97
  • Forward P/E: 7.57
  • Price/Sales: 1.79
  • Price/Book: 0.70
  • PEG Ratio: 1.08
  • Total Debt: 487.02B
  • Annual dividend yield: 1.60%
  • Return on Equity: 5.21%
  • Return on Assets: 0.41%

Recent EPS Actuals vs. Estimates

The company has met or beaten analysts' estimates in the last two quarters. In the last quarter it reported $3.92 EPS, beating analyst estimates of $3.55.

The consensus EPS estimate is $1.27 based on 23 analysts' estimates, down from $1.85 a year ago. Revenue estimates are $6.51B, down from $7.28B a year ago. The median target price by analysts for the stock is $120.00.

Average recommendation: Overweight

Source: Marketwatch

Analyst Upgrades and Downgrades

  • On May 20, 2012, the company was downgraded from Mkt Outperform to Mkt Underperform at JMP Securities.
  • On April 17, 2012, JMP Securities reiterated Mkt Outperform rating for the company.
  • On March 22, 2012, the company was upgraded from Underperform to Sector Perform at RBC Capital Mkts.

Latest Developments

  • On July 9, 2012, Reuters reported that Dutch pension fund Pensioenfonds Vervoer has filed two claims totalling up to EUR240 million ($300 million) against a unit of Goldman Sachs Group, alleging negligence leading to losses.
  • On July 6, 2012, Reuters reported that Goldman Sachs Group Inc has secured three properties in Tokyo for JPY25 billion ($313 million) as its asset management unit prepares to set up a private real estate investment trust (REIT).
  • On July 5, 2012, The Economic Times reported that Mahindra And Mahindra Ltd may be considering a bid for Hawker Beechcraft; the bankrupt aircraft maker.
  • On July 4, 2012, Reuters reported that Goldman Sachs Group Inc lost an appeal on Tuesday against a $20.6 million arbitration award won by creditors of bankrupt hedge fund Bayou Group.
  • On June 29, 2012, Reuters reported that Goldman Sachs Group Inc trimmed staff in its U.S. operations on Thursday, amid a slowdown in capital markets activity. The investment bank cut several dozen jobs at its offices in New York, New Jersey and Salt Lake City, Utah.
  • On June 22, 2012, Reuters reported that A U.S. federal judge said that shareholders can proceed with a lawsuit accusing Goldman Sachs Group Inc of concealing conflicts of interest in several collateralized debt obligation transactions.
  • On June 22, 2012, Reuters reported that Ratings agency Moody's downgraded 15 banks on Thursday, lowering credit ratings by one to three notches to reflect the risk of losses they face from volatile capital markets activities, but banks criticized the move as backward looking.
  • On June 19, 2012, Reuters reported that Japan has excluded Nomura Holdings, Inc. from working on the government's sale of roughly $6 billion worth of JAPAN TOBACCO INC. shares.
  • On June 14, 2012, International Game Technology announced that its Board of Directors has authorized a new share repurchase program of up to $1 billion of the Company's outstanding common stock.
  • On May 25, 2012, Dow Jones reported that Goldman Sachs Group Inc plans to launch a private real-estate investment trust in Japan this summer amid signs of an improvement in Tokyo property market.
  • On May 22, 2012, Reuters reported that Credit Suisse Group AG had won the latest auction of mortgage-linked collateralized debt obligations from The New York Fed's Maiden Lane III portfolio of assets assumed from American International Group, Inc. during the insurer's bailout in 2008.
  • On May 15, 2012, Goldman Sachs Group Inc's announced that it has completed its acquisition of Dwight Asset Management, a Vermont-based stable value money manager, from Old Mutual Asset Management.
  • On May 10, 2012, Reuters reported that the New York Federal Reserve sold all its TRIAXX collateralized debt obligations from a portfolio of assets that was used in the government bailout of insurer American International Group, Inc. to Bank of America Corp's Merrill Lynch, following a competitive bid process with eight other Wall Street firms.
  • On April 23, 2012, Dow Jones reported that Citigroup Inc, Credit Suisse Group AG and Goldman Sachs Group Inc are banding together to outbid five other Wall Street dealers for some $7.5 billion in complex commercial mortgage-backed securities taken on by the Federal Reserve Bank of New York during the 2008 bailout of American International Group.
  • On April 19, 2012, Reuters reported that a federal judge on Wednesday dismissed claims against Goldman Sachs Group Inc, JPMorgan Chase & Co. and 40 other defendants that they helped mislead investors in General Electric Co's $12.2 billion stock offering in 2008.
  • On April 17, 2012, Goldman Sachs Group Inc announced that the Board of Directors increased the firm's quarterly dividend to $0.46 per common share from $0.35 per common share.
  • On April 16, 2012, Reuters reported that Singapore state investor Temasek bought $2.3 billion worth of Industrial and Commercial Bank of China (ICBC) Hong Kong-listed shares from seller The Goldman Sachs Group, Inc. Temasek was burned by its financial industry exposure in 2008, hit by stakes in large European and U.S. banks that plunged in the crisis.
  • On April 13, 2012, Goldman Sachs Group Inc announced that it has declared dividends on the following series of its non-cumulative preferred stock (represented by depositary shares, each representing a 1/1,000th interest in a share of preferred stock): $234.38 per share of Floating Rate Non-Cumulative Preferred Stock, Series A; $387.50 per share of 6.20% Non-Cumulative Preferred Stock, Series B; $250.00 per share of Floating Rate Non-Cumulative Preferred Stock, Series C; and $250.00 per share of Floating Rate Non-Cumulative Preferred Stock, Series D. The dividends on all series of preferred stock will be paid on May 10, 2012 to preferred shareholders of record on April 25, 2012.
  • On April 13, 2012, Reuters reported that The Goldman Sachs Group, Inc. agreed to pay $22 million to settle civil charges arising from Company procedures that created the risk select clients would receive market sensitive information, such as changes to Goldman's recommendation lists and its ratings of stocks.
  • On April 10, 2012, The Goldman Sachs Group Inc and Ariel Holdings Ltd announced that Ariel Holdings has completed the sale of Ariel Reinsurance's Bermuda based insurance and reinsurance operations to Goldman Sachs, pursuant to the Acquisition Agreement announced on March 1, 2012.
  • On March 21, 2012, Reuters reported that The Goldman Sachs Group, Inc. lost its bid to dismiss a lawsuit accusing it of defrauding investors by selling risky debt linked to subprime mortgages that it planned to bet against.
  • On March 20, 2012, Reuters reported that The Goldman Sachs Group, Inc. has begun a new round of staff cuts in its trading and investment banking divisions, three sources familiar with the matter said, a sign of continued cutbacks on Wall Street.
  • On March 16, 2012, Reuters reported that several banks including The Goldman Sachs Group, Inc. have shown an interest in buying American International Group, Inc. complex and troubled assets tied to the insurer's bailout.
  • On March 1, 2012, The Goldman Sachs Group, Inc. announced that Goldman Sachs is acquiring Ariel Reinsurance`s Bermuda-based insurance and reinsurance operations, which it will combine with its existing business underwritten through Lloyd`s Syndicate 1910.
  • On February 17, 2012, Transunion Corp announced that Advent International and The Goldman Sachs Group, Inc's GS Capital Partners VI Fund, LP and certain of its affiliates (Sponsors) have signed a definitive merger agreement to acquire TransUnion from its current stockholders, including Madison Dearborn Partners and the Pritzker family business interests.
  • On February 16, 2012, Reuters reported that Moody's warned on Thursday it may cut the credit ratings of 17 global and 114 European financial institutions in another sign the impact of the euro zone government debt crisis is spreading throughout the global financial system.
  • On February 14, 2012, Reuters reported that The Goldman Sachs Group, Inc. has sold its 372 billion won ($331 million)stake in Hana Financial Group Inc. in a block deal. The U.S. investment bank sold the stake at 38,950 won per share.
  • On February 9, 2012, Reuters reported that The Goldman Sachs Group, Inc. will buy a 4.8% stake in Trade and Development Bank of Mongolia (TDB). The privately owned bank, Mongolia's only issuer of international publicly traded debt and has previously secured investments from the Asian Development Bank and International Finance Corp. The investment is to be arranged by TDB Capital, the Mongolian bank's wholly owned investment banking subsidiary.
  • On February 7, 2012, The Goldman Sachs Group, Inc.'s Goldman Sachs Asset Management announced that it will acquire Dwight Asset Management ("Dwight"), a Vermont-based stable value money manager, from Old Mutual Asset Management ("OMAM").

Competitors

The Goldman Sachs Group, Inc. operates in Diversified Investments industry. The company could be compared to Bank of America Corporation (BAC), Citigroup, Inc. (C), JPMorgan Chase & Co. (JPM), Morgan Stanley (MS), and Wells Fargo & Company (WFC). Below is the table comparison of the most important ratios between these companies and the industry.

Below is the chart comparison with the stock price changes as a percentage for the selected companies and S&P 500 index for the last one year period.

GS ChartClick to enlarge

GS data by YCharts

Competitors' Latest Development

  • On July 6, 2012, Mint reported that Morgan Stanley is in talks to acquire a stake in Lanco Infratech Ltd's thermal power business at a time when India's electricity producers are struggling with fuel shortages and cost increases.
  • On July 6, 2012, Resolute Mining Limited announced that Bank of America Corporation and its related bodies corporate have ceased to be shareholders of the Company effective June 29, 2012.
  • On July 6, 2012, Reuters reported that a U.S. judge has ordered JPMorgan Chase & Co. to explain why the court should not force the bank to turn over 25 internal emails demanded as part of an investigation into whether it manipulated electricity markets in California and the Midwest.
  • On July 4, 2012, Reuters reported that U.S. energy regulators have subpoenaed JPMorgan Chase & Co. to produce 25 internal emails as part of an investigation into whether the bank manipulated electricity markets in California and the Midwest.
  • On July 3, 2012, Bank of America Corp announced that the Board of Directors has authorized dividends on preferred stock. A quarterly cash dividend of $0.38775 per depositary share on the 6.204% Non-Cumulative Preferred Stock, Series D, is payable on September 14, 2012 to shareholders of record as of August 31, 2012.
  • On July 3, 2012, Reuters reported that JPMorgan Chase & Co.'s One Equity Partners, the Company's private investment arm, will buy technology services firm M*Modal Inc. for about $1.1 billion in cash.
  • On June 26, 2012, Citigroup Inc announced that it has been awarded a contract renewal of its fund services to Victory Capital Management and to the Victory Funds. Citi will continue to provide administration and accounting services to Victory Capital Management and serve as the global custodian and transfer agent to the Victory Funds.
  • On June 26, 2012, Dow Jones reported that according to the Economic Times newspaper Morgan Stanley's Morgan Stanley Infrastructure Partners has agreed to buy a majority stake in privately-held Continuum Wind Energy for about INR12 billion ($210.1 million).
  • On June 25, 2012, Reuters reported that Julius Baer Gruppe AG in talks with Bank of America Corporation about buying Merrill Lynch's non-U.S. wealth management unit, is particularly interested in its presence in Asia and Latin America.
  • On June 25, 2012, Integra Mining Ltd. announced that JPMorgan Chase & Co. and its affiliates have ceased to be shareholders of the Company effective April 9, 2012.
  • On June 25, 2012, Wells Fargo & Company announced that it has reached a definitive agreement to acquire WestLB's subscription finance portfolio. The portfolio contains approximately $6 billion in commitments (approximately $3 billion outstanding).
  • On June 22, 2012, Reuters reported that Ratings agency Moody's downgraded 15 banks on Thursday, lowering credit ratings by one to three notches to reflect the risk of losses they face from volatile capital markets activities, but banks criticized the move as backward looking.
  • On June 21, 2012, Reuters reported that Bank of America Corp directors have reached a definitive settlement of litigation by shareholders, who accused the bank of overpaying for Merrill Lynch & Co, a federal judge said on Wednesday.
  • On June 21, 2012, Reuters reported that JPMorgan Chase & Co.'s asset management business has created a new unit, which will oversee $100 billion in assets under management and incorporate teams from the company's investment management and wealth management divisions.
  • On June 19, 2012, Reuters reported that Julius Baer Gruppe AG was in talks about buying Bank of America Corp's non-U.S. wealth management operations, reported to be worth up to $2 billion.
  • On June 19, 2012, Reuters reported that Japan has excluded Nomura Holdings, Inc. from working on the government's sale of roughly $6 billion worth of JAPAN TOBACCO INC. shares.
  • On June 15, 2012, Bank of America Corp announced the Board of Directors authorized a regular quarterly dividend of $18.125 per share on the 7.25% Non-Cumulative Perpetual Convertible Preferred Stock, Series L. The dividend is payable on July 30, 2012 to shareholders of record as of July 1, 2012.
  • On June 15, 2012, Wells Fargo & Co announced that it has doubled its ExpressSend remittance network payout locations in India through an agreement with HDFC Bank Limited.
  • On June 12, 2012, Indophil Resources NL announced that Bank of America Corporation and its related bodies corporate have ceased to be shareholders of the Company effective June 7, 2012.
  • On June 11, 2012, REN Redes Energeticas Nacionais SGPS SA (REN) announced that on June 11, 2012 JP Morgan Securities Ltd, a subsidiary of JPMorgan Chase & Co, acquired 28,131,422 ordinary shares class A, corresponding to 5.272% of REN's share capital .
  • On June 7, 2012, Reuters reported that according to CNBC television, Morgan Stanley is considering selling a stake in its vaunted commodities trading division. The investment bank has been exploring a partial sale since at least last year and has talked to several parties, including private equity firm Blackstone Group LP, CNBC television reported on June 6, 2012, citing sources.
  • On June 6, 2012, Reuters reported that U.S. bank regulators will review whether JPMorgan Chase & Co. executives should have to give back compensation due to the bank's failed hedging strategy that has produced at least $2 billion in losses.
  • On June 1, 2012, Reuters reported that Blackstone Group LP and Morgan Stanley have agreed to pay AUD640 million ($621 million) to acquire a AUD1.9 billion portfolio of distressed property loans in Australia from a unit of Lloyds Banking Group PLC's Banking Group.

Sources: Yahoo Finance, Google Finance, Marketwatch, Finviz, Reuters.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.