By Brendan Gilmartin
Goldman Sachs (GS) is scheduled to report Q2 2012 earnings before the opening bell on Tuesday, July 17. The firm indicated it would provide a press release at 7:30 a.m. ET 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 and Strategy
- Earnings Per Share: The current Street estimate is $1.15 (range is $0.82 to $1.70). Source: Yahoo Finance.
- Revenues are seen coming in at $6.41 billion, down 12.0% year over year.
- Goldman Sachs shares are now trading at a mere 7.53 times forward profits, vs. the Standard & Poor's multiple of 13.5 times and 0.65 times book.
- At a recent price of $97.42, Goldman Sachs is now trading at a slight discount to tangible book value ($123.94) and a single-digit forward P/E multiple. Goldman also boasts an impressive balance sheet and trades at a mere 0.81 times cash.
- Keep an eye on the following as sympathy plays: Morgan Stanley (MS) (reports earnings on Thursday, July 19), Jefferies (JEF), Lazard (LAZ), and Barclay's (BCS).
- June 28: According to a report on Reuters.com, Citigroup cut estimates and targets on several large-cap U.S. banks, based on concerns in the eurozone, widening credit spreads, and declining equity and commodity prices. As part of the call, Citi slashed its price target on Goldman Sachs from $145 to $110.
- June 26: JMP Securities reiterated a Market Underperform rating on Goldman Sachs with a $77 price target and lowered the Q2 EPS estimate from $1.74 to $1.50, according to Barron's Online. The firm cited several reasons for the cautious outlook, including the European debt crisis, the "fiscal cliff" in the U.S., and regulation, including the implementation of the Volker Rule.
- June 21: Moody's announced it lowered the long-term senior rating on Goldman Sachs from A1 to A3 with a Negative outlook, based on increased risk and volatility tied to capital markets activities as well as the operating environment in Europe.
- June 13: Oppenheimer is becoming increasingly positive on Goldman Sachs, according to a report on Barron's Online. The firm cited recent meetings with Goldman CFO David Viniar for the improving outlook.
Goldman Sachs shares recently slipped to $91, matching the early June low, resulting in a bullish "Double-Bottom" formation. Since then, the shares have climbed back toward the psychologically important $100 level, an area that also poses some technical resistance in the event of a solid earnings release next Tuesday. Should results disappoint, look for support at the aforementioned low near $91.
Chart courtesy of StockCharts.com.
Goldman Sachs shares recently slipped toward levels not seen since the start of the year amid concerns over the impact of the European debt crisis, weaker trading revenues, volatility tied to capital markets, the U.S. regulatory backdrop, and the implications of the "fiscal cliff" in the U.S. But with the shares now trading more than 23% off the March YTD highs and a steep discount to tangible book value ($123.94 as of March 31, 2012), much of the expected weakness may be priced in at these levels. Solid earnings from JPMorgan Chase (JPM) also bode well for Goldman Sachs shares headed into the Q2 earnings release.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
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