With earnings expected to be released on Tuesday, many people are once again expecting cream of the crop Goldman Sachs to report strong figures – earnings of $3.48 for period ending June 30th, versus $4.58 a year ago and $3.39 from last quarter. BofA Merrill Lynch analyst Guy Moszkowski even expects a much higer number of $3.90. Three other banks report this week – JP Morgan, Citi and Bank of America (among the three, I am only counting on JP Morgan).
From CNN Money, here are some quick details on Q1 earnings:
In reporting its results a day earlier than expected, New York-based Goldman said it earned $1.81 billion, or $3.39 a share, for the quarter ended March 31. Analysts surveyed by Thomson Financial were looking for a profit of $1.64 a share.
The strength of the bank holding company is the result of a strong trading platform that allows it to perform trades at a much faster pace than its competitors. Just the subject of a controversy last week, the same platform are expected to benefit the firm.
A little on the high-frequency trading used by the firm:
High-frequency trading has become one of the fastest-expanding strategies on Wall Street, accounting for more than 73% of stock-trading volume in the U.S. this year, up from 59% in 2008, according to Tabb Group, a New York research firm.
Last quarter’s strong results were delivered by earnings from fixed income trades (just as it was for its other competitors). With the quick and strong rally after March 9 lows (which however ended just a couple of weeks back), the equities (and commodities) along with debt underwriting might just be the performer for the firm for Q2. It should also take a lot from mergers and acquisition and advisory fees, serving as one of the top 3 in the field along with Jamie Dimon’s firm and Morgan Stanley, expected though to report losses in the following weeks.
I hope to break down the details here on my blog when the firm releases tomorrow.
Meredith Whitney on CNBC’s Squawk Box points out that Goldman’s earnings will be strongly helped by debt underwriting, saying that while Goldman’s earnings come from different things from time to time, it will be from underwriting debt this time. She cited the example of California, which looked into IOUs to support its deficit. Issuing a ‘Buy’ recommendation, she gave Goldman a price target of $185/6. That’s about 30% from the current price.