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Trading, NII to Aid Goldman's (GS) Q4 Earnings, IB to Hurt
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The Goldman Sachs Group, Inc. (GS - Free Report) is slated to release fourth-quarter and full-year 2022 earnings on Jan 17, before market open. The company is expected to have witnessed year-over-year declines in quarterly revenues and earnings.
In the last reported quarter, Goldman’s earnings surpassed the Zacks Consensus Estimate. While strength in Fixed Income, Currency and Commodities (FICC), wealth management and consumer banking businesses acted as a tailwind, the company’s results were hurt by weakness in investment banking operations.
Over the trailing four quarters, the company’s earnings surpassed the consensus estimate on three of the four occasions and missed once, the surprise being 8.84%, on average.
The Goldman Sachs Group, Inc. Price and EPS Surprise
Trading Revenues: Similar to the first three quarters of 2022, market volatility and client activity remained robust during the fourth quarter. Several factors, including Russia’s invasion of Ukraine and continued supply chain disruptions, led to ambiguity among investors. Also, the ultra-aggressive stance of the central banks across the globe to control inflation and resultant fears of an economic downturn/recession drove client activity and trading volume.
These factors led to heightened volatility in equity markets and other asset classes, including commodities, bonds and foreign exchange. Thus, Goldman is expected to have witnessed robust FICC and equity trading in the fourth quarter.
Investment Banking (IB) Fees: After a stellar performance in 2021, global deal-making shrank for the fourth consecutive quarter. A host of factors like geopolitical tensions, sky-high inflation, rising interest rates and fears of a global recession acted as headwinds for M&As. Thus, both deal volume and total value numbers crashed during the fourth quarter. Also, Goldman’s leadership in the space is less likely to have offered support to advisory fees.
For similar reasons, IPOs and follow-up equity issuances dried up in the to-be-reported quarter. Bond issuance volume witnessed a decline too as investors turned pessimistic. So, Goldman’s underwriting fees are expected to have been hurt during the December-ended quarter.
Net Interest Income (NII): While lending activity remained robust in the fourth quarter, the pace of loan growth across most categories slowed as the quarter progressed. Per the Fed’s latest data, commercial and industrial loans, real estate loans and consumer loans slightly moderated in the quarter. The company’s loan balances are likely to have improved in the fourth quarter.
The positive impacts of the Fed hiking interest rates by 125 basis points, resulting in a policy rate of 4.25-4.50%, are likely to get reflected in the company NII as well.
Expenses: Goldman’s investments in technology are anticipated to have led to a rise in costs in the to-be-reported quarter. Also, a rise in transaction-based expenses due to higher client activity and inflationary pressure across most expense lines is expected to have dragged earnings.
What Our Model Predicts
Our proven model shows that Goldman has the right combination of the two key ingredients — positive Earnings ESP and Zacks Rank #3 (Hold) or better — to increase the odds of an earnings beat.
You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Earnings ESP: The Earnings ESP for Goldman is +1.23%.
Zacks Rank: It currently carries a Zacks Rank #3.
The Zacks Consensus Estimate for fourth-quarter earnings has been revised 4.2% lower to $5.25 over the past week. It suggests a 51.4% year-over-year fall. Our estimate for earnings is $4.80 per share.
Also, the consensus estimate of $10.52 billion for quarterly revenues indicates a 16.8% fall. Our estimate for revenues is $10.29 billion.
Other Banks That Warrant a Look
Citizens Financial Group (CFG - Free Report) and Hancock Whitney Corporation (HWC - Free Report) are a few other bank stocks that you might also want to consider, as these too have the right combination of elements to post an earnings beat in their upcoming releases, per our model.
The Earnings ESP for CFG is +0.45% and the company carries a Zacks Rank #3 at present. The company is slated to report fourth-quarter and full-year 2022 results on Jan 17.
Image: Bigstock
Trading, NII to Aid Goldman's (GS) Q4 Earnings, IB to Hurt
The Goldman Sachs Group, Inc. (GS - Free Report) is slated to release fourth-quarter and full-year 2022 earnings on Jan 17, before market open. The company is expected to have witnessed year-over-year declines in quarterly revenues and earnings.
In the last reported quarter, Goldman’s earnings surpassed the Zacks Consensus Estimate. While strength in Fixed Income, Currency and Commodities (FICC), wealth management and consumer banking businesses acted as a tailwind, the company’s results were hurt by weakness in investment banking operations.
Over the trailing four quarters, the company’s earnings surpassed the consensus estimate on three of the four occasions and missed once, the surprise being 8.84%, on average.
The Goldman Sachs Group, Inc. Price and EPS Surprise
The Goldman Sachs Group, Inc. price-eps-surprise | The Goldman Sachs Group, Inc. Quote
Major Factors at Play
Trading Revenues: Similar to the first three quarters of 2022, market volatility and client activity remained robust during the fourth quarter. Several factors, including Russia’s invasion of Ukraine and continued supply chain disruptions, led to ambiguity among investors. Also, the ultra-aggressive stance of the central banks across the globe to control inflation and resultant fears of an economic downturn/recession drove client activity and trading volume.
These factors led to heightened volatility in equity markets and other asset classes, including commodities, bonds and foreign exchange. Thus, Goldman is expected to have witnessed robust FICC and equity trading in the fourth quarter.
Investment Banking (IB) Fees: After a stellar performance in 2021, global deal-making shrank for the fourth consecutive quarter. A host of factors like geopolitical tensions, sky-high inflation, rising interest rates and fears of a global recession acted as headwinds for M&As. Thus, both deal volume and total value numbers crashed during the fourth quarter. Also, Goldman’s leadership in the space is less likely to have offered support to advisory fees.
For similar reasons, IPOs and follow-up equity issuances dried up in the to-be-reported quarter. Bond issuance volume witnessed a decline too as investors turned pessimistic. So, Goldman’s underwriting fees are expected to have been hurt during the December-ended quarter.
Net Interest Income (NII): While lending activity remained robust in the fourth quarter, the pace of loan growth across most categories slowed as the quarter progressed. Per the Fed’s latest data, commercial and industrial loans, real estate loans and consumer loans slightly moderated in the quarter. The company’s loan balances are likely to have improved in the fourth quarter.
The positive impacts of the Fed hiking interest rates by 125 basis points, resulting in a policy rate of 4.25-4.50%, are likely to get reflected in the company NII as well.
Expenses: Goldman’s investments in technology are anticipated to have led to a rise in costs in the to-be-reported quarter. Also, a rise in transaction-based expenses due to higher client activity and inflationary pressure across most expense lines is expected to have dragged earnings.
What Our Model Predicts
Our proven model shows that Goldman has the right combination of the two key ingredients — positive Earnings ESP and Zacks Rank #3 (Hold) or better — to increase the odds of an earnings beat.
You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Earnings ESP: The Earnings ESP for Goldman is +1.23%.
Zacks Rank: It currently carries a Zacks Rank #3.
The Zacks Consensus Estimate for fourth-quarter earnings has been revised 4.2% lower to $5.25 over the past week. It suggests a 51.4% year-over-year fall. Our estimate for earnings is $4.80 per share.
Also, the consensus estimate of $10.52 billion for quarterly revenues indicates a 16.8% fall. Our estimate for revenues is $10.29 billion.
Other Banks That Warrant a Look
Citizens Financial Group (CFG - Free Report) and Hancock Whitney Corporation (HWC - Free Report) are a few other bank stocks that you might also want to consider, as these too have the right combination of elements to post an earnings beat in their upcoming releases, per our model.
The Earnings ESP for CFG is +0.45% and the company carries a Zacks Rank #3 at present. The company is slated to report fourth-quarter and full-year 2022 results on Jan 17.
Hancock Whitney is scheduled to announce fourth-quarter and full-year 2022 on Jan 17 as well. The company, with a Zacks Rank #2 (Buy) at present, has an Earnings ESP of +0.10%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.