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The Zacks Analyst Blog Highlights: Google, HSBC Holdings, Goldman Sachs Group, Citigroup and SunTrust Banks

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For Immediate Release

Chicago, IL – January 23, 2013 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include Google Inc. , HSBC Holdings plc , The Goldman Sachs Group, Inc. (GS - Analyst Report), Citigroup, Inc. (C - Analyst Report) and SunTrust Banks, Inc. (STI - Analyst Report).

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Here are highlights from Tuesday’s Analyst Blog:

Google Revs Up 36% Year Over Year

Search engine titan Google Inc. reported earnings after the bell, and while the results may have not been surprising, they are nevertheless fairly astonishing. The company brought in $14.42 billion over the past three months for a headline EPS read of $10.65 per share.

At Zacks, we account for stock-based compensation (as well as a 34-cent restructuring charge in the quarter), so our EPS number comes to $9.02. That's still notably higher than the $8.61 expected by the 12 analysts covering Google shares. Analysts also expected GOOG to bring in $12.42 billion for the quarter, so it beat on the top-line as well.

Each quarter, Google's reporting numbers create headaches for those trying to decipher their meaning. Not that there's anything tricky afoot here, but the nature of Google's different businesses lend the company's earnings reports to be less than obvious and straightforward. Long-time owners of GOOG shares can likely attest to the head-scratching that occurs when CEO Larry Page & Co. put their quarterly numbers out.

Contrary to what some casual observers may think, Google is anything but a lock to beat estimates quarter after quarter. In fact, over the previous 4 quarters, Google averages a negative EPS surprise of 4.91%, and the company missed big (17%) in the September quarter.

Analysts had been extremely dormant ahead of the company's earnings report, with no one adjusting estimates over the past month, and only 1 of 12 upgrading expectations over the past 60 days.

HSBC Settles Foreclosure Claims

Last week, HSBC Holdings plc became the latest bank to announce a foreclosure settlement deal with the Office of the Comptroller of the Currency (OCC) and other U.S. banking regulators. The company has agreed to pay $249 million to stop review of wrongful foreclosures in the U.S.

Out of the total amount, $96 million will be utilized for direct payments to eligible borrowers, while $153 million will be used for providing relief to troubled homeowners through principal reductions and loan modifications. The deal will enable nearly 112,000 homeowners, whose property was wrongly foreclosed in 2009–2010 by HSBC, to get cash compensation, ranging from a few hundred dollars to a maximum of $125,000.

Additionally, under the terms of the deal, the process initiated by the OCC in 2011 – to review all the borrowers’ files that were wrongly foreclosed in 2009-2010 – would end. Under that process, the banks were required to hire independent consultants to go through the loan files and look for any faulty foreclosure practice.

Earlier in the same week, The Goldman Sachs Group, Inc. (GS - Analyst Report) and Morgan Stanley agreed to pay $557 million in aggregate to settle similar charges. Moreover, in early January, 10 banks, including Citigroup, Inc. (C - Analyst Report), BofA, JPMorgan, Wells Fargo and SunTrust Banks, Inc. (STI - Analyst Report), agreed to pay a total of $8.5 billion.

As a result of the deal, HSBC is anticipated to record a pre-tax charge of $96 million in the fourth quarter of 2012, while the remaining amount is expected to be covered from the existing reserves.

Though the settlement is expected to marginally dent HSBC’s fourth-quarter results, in the long run it will be a big relief. Further, the distressed homeowners would also be benefited. We are hopeful that like the earlier foreclosure settlement deal, this one would also be a decisive step in restoring confidence in businesses and rejuvenating the sagging housing market.

HSBC currently retains a Zacks Rank #3 (Hold).

 

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