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Trading to Aid Goldman's (GS) Q1 Earnings, IB & Costs to Hurt
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The Goldman Sachs Group, Inc. (GS - Free Report) is slated to release first-quarter 2023 earnings on Apr 18, before market open. The company is expected to have witnessed a year-over-year decline in quarterly earnings, while revenues are expected to have increased.
In the last reported quarter, Goldman’s earnings missed the Zacks Consensus Estimate.The company’s results were adversely impacted by a slump in the investment banking business and a decline in asset management revenues. Higher provisions were other undermining factors. Yet, the strength in the Fixed Income, Currency and Commodities (“FICC”) and consumer banking businesses acted as tailwinds.
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 2.31%, on average.
Major Factors at Play
Trading Revenues: Similar to 2022, market volatility and client activity have been robust in the first quarter. Several factors like the ongoing Russia-Ukraine conflict, continued supply-chain disruptions, bank runs, fears of an economic recession and the central banks’ hawkish monetary policy stance to stem out “sticky” inflation led to ambiguity among investors.
These factors resulted in heightened volatility in the 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 first quarter.
Our estimate for the same stands at $7.9 billion.
Investment Banking (IB) Fees: Like 2022, global deal-making continued to shrink in the first quarter. A host of factors, such as tighter monetary policy, geopolitical tensions, inflation, and fears of a global recession, acted as headwinds for M&As.
Thus, deal volume and total value numbers crashed in the quarter. While GS’ position as one of the leading players in the space is likely to have provided some leverage, overall growth in IB fees is not expected to have been impressive in the quarter. Also, Goldman’s leadership in the space is less likely to have offered support to the metric.
For similar reasons, IPOs and follow-up equity issuances dried up in the to-be-reported quarter. Bond issuance volume witnessed a decline as investors turned pessimistic. Therefore, Goldman’s underwriting fees are expected to have been hurt in the March-ended quarter.
Our estimate for IB fees stands at $2 billion.
Net Interest Income (NII): Banks’ lending activities declined in the first quarter, with the pace of loan growth across most categories slowing as the quarter progressed. This likely resulted from the Silicon Valley Bank failure in the first week of March, which resulted in heightening recessionary fears and lower loan demand. Per the Fed’s latest data, demand for commercial and industrial loans, real estate loans, and consumer loans declined in the first quarter.
Nevertheless, the Federal Reserve continued tightening its monetary policy, albeit at a slower pace, raising rates by 50 basis points in the quarter. The policy rate reached 4.75-5%, the highest since 2008. This is likely to have had a favorable impact on the company’s NII.
The Zacks Consensus Estimate for total non-interest income is pegged at $2.15 billion, indicating a sequential rise of 4%. Our estimate for the same stands at $2.09 billion.
Expenses: Goldman’s investments in technology are anticipated to have led to a rise in costs in the to-be-reported quarter. Also, an increase in transaction-based expenses due to higher client activity and inflationary pressure across most expense lines is expected to have affected earnings.
What Our Model Predicts
Our proven model does not show 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 -0.52%.
The Zacks Consensus Estimate for first-quarter earnings has been revised 4.6% lower to $8.14 over the past week. The consensus estimate suggests a 24.4% year-over-year fall. Our estimate for earnings is $7.70 per share.
Also, the consensus estimate of $13.03 billion for quarterly revenues indicates a 0.7% sequential rise. Our estimate for revenues is $12.8 billion.
Stocks Worth a Look
A few stocks, which you may want to consider, as these have the right combination of elements to post an earnings beat in their upcoming releases per our model, are The Bank of New York Mellon (BK - Free Report) and Commerce Bancshares (CBSH - Free Report) .
The Bank of New York Mellon is scheduled to release first-quarter 2023 earnings on Apr 18. The company, which carries a Zacks Rank #3 at present, has an Earnings ESP of +2.29%.
CBSH has an Earnings ESP of +2.46% and carries a Zacks Rank #3 at present. CBSH is slated to report first-quarter 2023 results on Apr 18.
Image: Bigstock
Trading to Aid Goldman's (GS) Q1 Earnings, IB & Costs to Hurt
The Goldman Sachs Group, Inc. (GS - Free Report) is slated to release first-quarter 2023 earnings on Apr 18, before market open. The company is expected to have witnessed a year-over-year decline in quarterly earnings, while revenues are expected to have increased.
In the last reported quarter, Goldman’s earnings missed the Zacks Consensus Estimate.The company’s results were adversely impacted by a slump in the investment banking business and a decline in asset management revenues. Higher provisions were other undermining factors. Yet, the strength in the Fixed Income, Currency and Commodities (“FICC”) and consumer banking businesses acted as tailwinds.
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 2.31%, on average.
Major Factors at Play
Trading Revenues: Similar to 2022, market volatility and client activity have been robust in the first quarter. Several factors like the ongoing Russia-Ukraine conflict, continued supply-chain disruptions, bank runs, fears of an economic recession and the central banks’ hawkish monetary policy stance to stem out “sticky” inflation led to ambiguity among investors.
These factors resulted in heightened volatility in the 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 first quarter.
Our estimate for the same stands at $7.9 billion.
Investment Banking (IB) Fees: Like 2022, global deal-making continued to shrink in the first quarter. A host of factors, such as tighter monetary policy, geopolitical tensions, inflation, and fears of a global recession, acted as headwinds for M&As.
Thus, deal volume and total value numbers crashed in the quarter. While GS’ position as one of the leading players in the space is likely to have provided some leverage, overall growth in IB fees is not expected to have been impressive in the quarter. Also, Goldman’s leadership in the space is less likely to have offered support to the metric.
For similar reasons, IPOs and follow-up equity issuances dried up in the to-be-reported quarter. Bond issuance volume witnessed a decline as investors turned pessimistic. Therefore, Goldman’s underwriting fees are expected to have been hurt in the March-ended quarter.
Our estimate for IB fees stands at $2 billion.
Net Interest Income (NII): Banks’ lending activities declined in the first quarter, with the pace of loan growth across most categories slowing as the quarter progressed. This likely resulted from the Silicon Valley Bank failure in the first week of March, which resulted in heightening recessionary fears and lower loan demand. Per the Fed’s latest data, demand for commercial and industrial loans, real estate loans, and consumer loans declined in the first quarter.
Nevertheless, the Federal Reserve continued tightening its monetary policy, albeit at a slower pace, raising rates by 50 basis points in the quarter. The policy rate reached 4.75-5%, the highest since 2008. This is likely to have had a favorable impact on the company’s NII.
The Zacks Consensus Estimate for total non-interest income is pegged at $2.15 billion, indicating a sequential rise of 4%. Our estimate for the same stands at $2.09 billion.
Expenses: Goldman’s investments in technology are anticipated to have led to a rise in costs in the to-be-reported quarter. Also, an increase in transaction-based expenses due to higher client activity and inflationary pressure across most expense lines is expected to have affected earnings.
What Our Model Predicts
Our proven model does not show 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 -0.52%.
Zacks Rank: The company currently carries a Zacks Rank #3.You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for first-quarter earnings has been revised 4.6% lower to $8.14 over the past week. The consensus estimate suggests a 24.4% year-over-year fall. Our estimate for earnings is $7.70 per share.
Also, the consensus estimate of $13.03 billion for quarterly revenues indicates a 0.7% sequential rise. Our estimate for revenues is $12.8 billion.
Stocks Worth a Look
A few stocks, which you may want to consider, as these have the right combination of elements to post an earnings beat in their upcoming releases per our model, are The Bank of New York Mellon (BK - Free Report) and Commerce Bancshares (CBSH - Free Report) .
The Bank of New York Mellon is scheduled to release first-quarter 2023 earnings on Apr 18. The company, which carries a Zacks Rank #3 at present, has an Earnings ESP of +2.29%.
CBSH has an Earnings ESP of +2.46% and carries a Zacks Rank #3 at present. CBSH is slated to report first-quarter 2023 results on Apr 18.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.