Goldman Sachs Group (NYSE: GS): Q1 Earnings Preview 2011

Goldman Sachs Group, Inc. (NYSE: GS), the fifth-biggest U.S. bank by assets, is scheduled to release its first-quarter earnings before the opening bell on Tuesday, April 19, 2011. Analysts, on average, expect the company to report earnings of $0.82 per share on revenue of $10.18 billion. In the year ago quarter, the company reported earnings of $5.59 per share on revenue of $12.78 billion.

The Goldman Sachs Group, Inc., together with its subsidiaries, provides investment banking, securities, and investment management services to corporations, financial institutions, governments, and high-net-worth individuals worldwide.

In the preceding fourth quarter, the New York-based company's net income was $2.39 billion, or $3.79 a share, compared to $4.95 billion, or $8.20 a share, in the year-earlier period. Revenue declined to $8.64 billion from $9.62 billion.  Analysts, on average, expected the company to report earnings of $3.76 per share on revenue of $9 billion.

Though most of the major banks had to absorb extraordinary shocks from the recession, Goldman maintained consistent profitability throughout the downturn in the economy. 

However, the company's reputation has taken a serious hit since the financial crisis. The firm's CEO, Lloyd Blankfein, has been publicly flogged by lawmakers and recently testified in an insider trading case. Fraud charges against Goldman and concerns about how tougher financial regulation (much of which was crafted in the wake of Abacus) will impact the firm, will be an overhang on the stock for a while.

Recently,  a Congressional report raised investor fears of more regulatory scrutiny on the company. Senator Carl Levin, a Democrat from Michigan who heads the  Permanent Subcommittee on Investigations, was harshly critical of Goldman during a press briefing and suggested that the company may face additional scrutiny from the Department of Justice or the U.S. Securities and Exchange Commission.

Last month, in a regulatory filing, Goldman Sachs disclosed that the company could lose as much as $3.4 billion in damages and other litigation-related matters involving securities it underwrote in the last few years for which the purchasers are now suing to recover losses or to force the firm to buy them back.

In March, the investment bank redeemed preferred stock  sold to Warren Buffett’s Berkshire Hathaway in the midst of the 2008 global financial crisis. The redemption includes a one-time preferred dividend of about $1.64 billion, which is expected to reduce Goldman's reported earnings for the first quarter by about $2.80 per share. The redemption also results in the acceleration of $24 million of preferred dividends that are payable from April 1 to the redemption date of April 18, which will reduce reported earnings for the first quarter by about $0.04 per share. Goldman had sold the preferred shares to Berkshire at the height of the financial crisis in 2008.

The company's stock currently trades at a forward P/E (fye Dec 31, 2012) of 8.10 and PEG ratio (5 yr expected) of 1.  In terms of stock performance, Goldman Sachs shares have lost nearly 15 percent over the past year.

Full Disclosure: None.

Goldman Sachs Group (NYSE: GS): Q4 Earnings Preview 2010

Goldman Sachs Group, Inc. (NYSE: GS) is scheduled to release its fourth-quarter earnings before the opening bell on Wednesday, January 19, 2011. Analysts, on average, expect the company to report earnings of $4.03 per share on revenue of $9.26 billion. In the year ago quarter, the company reported earnings of $8.20 per share on revenue of $9.62 billion.

The Goldman Sachs Group, Inc., together with its subsidiaries, provides investment banking, securities, and investment management services to corporations, financial institutions, governments, and high-net-worth individuals worldwide.

The Goldman Sachs Group, Inc., together with its subsidiaries, provides various investment banking, securities, and investment management services to corporations, financial institutions, governments, and high-net-worth individuals worldwide. Goldman Sachs operates through three main segments: Investment Banking, Trading and Principal Investments and Asset Management and Securities Services.

In the preceding third quarter, the New York-based company's net income was $1.9 billion, or $2.98 a share, compared to $3.19 billion, or $5.25 a share, in the year-earlier period. Revenue declined to $8.90 billion from $12.3 billion. Analysts, on average, expected the company to report earnings of $2.28 per share on revenue of $7.92 billion.

Though most of the major banks had to absorb extraordinary shocks from the recession, Goldman maintained consistent profitability throughout the downturn in the economy. Despite the impact on earnings power from the recent financial reform law and continuing pressure on trading revenues, Goldman is expected to deliver, based on its prudent business model and strong fundamentals.

The company has benefited from its well managed global franchise, strong capital base and leading position in investment banking, capital markets, trading, and asset management business. Though the new financial regulatory reform will remain a challenge for Goldman’s top line, it has taken proactive measures to strengthen its business model while complying with such regulatory changes.

Recently, Goldman Sachs invested $450 million in Facebook, valuing the popular social networking site at $50 billion. Goldman is planning to create a "special purpose vehicle" to allow high-net-worth clients to invest in Facebook. According to the sources, Goldman could pool money -- as much as $1.5 billion -- from thousands of investors for a stake in Facebook. 

Among other developments, Goldman Sachs Group said that it will sell its stake in Accordia Golf Co., ending an almost decade-long investment in the sport in Japan. The stake is worth about 37 billion yen ($445 million). 

In terms of stock performance, Goldman Sachs shares have gained nearly 12 percent over the past year.

Full Disclosure: None.

Goldman Sachs Group Inc. (NYSE: GS): Q1 Earnings Preview 2010

Goldman Sachs is scheduled to release Q12010 earnings before the opening bell on Tuesday, April 20, 2010. Analysts, on average, expect the company to report earnings of $4.02 per share in the first quarter with estimates ranging from a low of $3.33 to a high of $4.45 per share. Revenues for the quarter are estimated to be $11.19 billion. In Q12009, the company reported earnings of $3.39 per share on revenue of $9.43 billion. In the previous four quarters, GS has beaten Wall Street estimates by huge margins, reporting increasing EPS in every quarter.

The Goldman Sachs Group, Inc., together with its subsidiaries, provides various investment banking, securities, and investment management services to corporations, financial institutions, governments, and high-net-worth individuals worldwide.

In the preceding Q42009, the New York-based company reported that it swung to a profit of $4.95 billion, or $8.20 a share, compared to a loss of $2.12 billion, or $4.97 a share, in the prior-year quarter. Revenue totaled $9.615 billion, compared to negative revenues of $1.578 billion in the fourth quarter of 2008. Analysts, on average, expected the company to report earnings of $5.20 per share on revenue of $9.65 billion.

Goldman was the most popular bank for advising clients involved in mergers and acquisitions -- up from No. 3 last year, according to data tracker Dealogic’s data. Goldman was involved in six of the 10 largest mergers and acquisitions of the first quarter of 2010 -- including the largest one, the sale of one of AIG's largest insurance businesses, Dealogic said. The bank was involved in 61 deals altogether and won 10% of the revenue in the sector.The bank came in second in the rankings of firms in the capital markets sector, which includes underwriting stock offerings. That was up from eighth last year.

However, the company's public image has taken a serious hit in recent times amid a wave of withering criticism of its business practices. More recently, Goldman has come under scrutiny following reports that it helped Greece conceal its debt levels in 2001 through a series of complex derivatives deals. It recently said in its annual report that "adverse publicity," bad PR, could pose a risk to its bottom line.

In a letter to shareholders, the company recently refuted allegations that it profited improperly from the state rescue of insurance giant AIG and that it took positions against clients to whom it had sold high-risk property assets.

In terms of stock performance, Goldman Sachs shares have gained nearly 1 percent since the beginning of the year.

Full Disclosure: None.

Goldman Sachs Group Inc. (NYSE: GS): Q4 Earnings Preview 2009

Goldman Sachs Group Inc. (NYSE: GS), the fifth-biggest U.S. bank by assets, is scheduled to release its fourth quarter earnings for 2009 before the opening bell on Thursday, January 21, 2010. Analysts, on average, expect the company to report earnings of $5.19 per share on revenue of $9.75 billion. In the year ago period, the company reported net loss of $4.97 per share on negative net revenue of $1.58 billion. In the previous three quarters, GS has beaten Wall Street estimates by huge margins, reporting increasing EPS in every quarter.

The Goldman Sachs Group, Inc., together with its subsidiaries, provides various investment banking, securities, and investment management services to corporations, financial institutions, governments, and high-net-worth individuals worldwide.

Goldman was not hurt as much as its peers during the financial crisis, in part because it limited its exposure to risky bets on subprime mortgages. In October, the New York-based company reported that its third quarter net earnings nearly quadrupled $3.03 billion, or $5.25 a share, from $845 million, or $1.81 per share, in the year-earlier period. Quarterly net revenues, including net interest income, climbed to $12.37 billion from $6.04 billion last year. Analysts, on average, expected the company to report earnings of $4.24 per share on revenue of $11.02 billion.

Net revenue in Fixed Income, Currency and Commodities (FICC) was $5.99 billion in the third quarter, up from $1.59 billion a year earlier. The increase reflects strong performances in credit products and mortgages, which were significantly higher compared to a difficult third quarter of 2008.

Goldman Sachs returned 21.4% on its equity in third quarter compared to 7.7% in the year-ago quarter.

The company has benefited from an uptick in merger and acquisition activity in past months. In 2009, the firm advised on 244 deals valued at $548 billion, according to data compiled by Mergermarket. The firm was ranked second in mergers and acquisitions league tables of 2009, behind Morgan Stanley. However, falling debt trading volumes is a major concern as it had been the banks' key profit engines in the previous quarters. Goldman almost gets half its “core revenue” from fixed income and commodities and currency. Recently, Citigroup analyst Keith Horowitz downgraded Goldman's stock citing a slowdown in FICC -- fixed-income, currency and commodities trading. "Our analysis points to a substantial decline in FICC trading in the fourth quarter of 2009, and then we are looking for industry fixed income trading to fall 15%-20% in 2010," Horowitz wrote in a note to clients. "We expect 2011 revenues to also be under pressure due to the impact of regulatory reform, which we see negatively impacting FICC revenue growth by 5%-10% in 2011," he added.

Similarly, Barclays analysts Roger Freeman and Eric Bertrand said they expect equity trading to fall 7% due to lower activity in exchange-traded funds and in the financial stocks. The firm previously expected a 6% rise. The analyst also lowered fixed-income expectations to 7% growth, down from 14%.

Thus in retrospective, it appears that the investors are cautious ahead of announcement as a slump in fixed income volume could significantly impact the fourth quarter earnings. The company's stock currently trades at a forward P/E (fye 28-Nov-10) of 8.87 and PEG ratio (5 r expected) of 0.77. In terms of stock performance, Goldman Sachs shares have gained nearly 129% over the past year.

Full Disclosure: None.