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Will Subdued Trading Volumes Mar Goldman's (GS) Q2 Earnings?
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While investment banks have reaped the benefits of elevated trading volumes across asset classes over the past five quarters, market normalization and reduced volatility in the second quarter are expected to have dampened capital markets’ revenue growth.
This, in turn, is expected to have hindered Goldman Sachs’ (GS - Free Report) second-quarter 2021 earnings, slated to be released on Jul 13, before market open.
Over the trailing four quarters, the company’s earnings have surpassed the consensus estimate on all four occasions, the positive surprise being 73.5%, on average.
The Goldman Sachs Group, Inc. Price and EPS Surprise
While Federal Reserve’s continued bond-buying program is likely to have supported fixed-income trading volumes, low volatility is anticipated to have impacted equity volumes.
The Zacks Consensus Estimate of $2.4 billion for net revenues in Fixed Income, Currency and Commodities Client Execution suggests a 38.4% fall from the previous quarter’s reported number. The consensus estimate of $2.5 billion for total equity revenues indicates a plunge of 32.9% sequentially.
Notably, Goldman’s asset management business is expected to have put up a decent performance in the reported quarter. Higher market gains are likely to have driven inflows from the asset management business. Also, improvement in the prices of asset values is anticipated to have aided asset management fees.
Other Factors at Play
Impressive Investment Banking Fees: Global merger and acquisition (M&A) activity trends have been robust in the quarter under review as dealmakers across the globe were active during this period, with a rise in M&A deal value and volume. This was likely driven by the low-interest-rate environment and efforts to avoid transactions getting taxed at a higher rate later, given President Joe Biden's proposed tax hikes.
Goldman’s IPO activities have been impressive in the second quarter, while strength equity underwriting, as companies tried to shore up liquidity to tide over the pandemic-induced crisis, is likely to have aided fee growth from equity capital markets. Given the favorable market sentiment and the company’s fortified market presence, Goldman is well-poised to have seen a positive impact on its advisory fees.
However, after a sizable incremental SPAC issuance activity in the previous quarter, the SPAC listings have declined significantly in the quarter under review. This is expected to have affected the company’s investment banking fees.
The consensus estimate for investment banking fees of $3.1 billion indicates a 17.6% sequential decline.
Consumer Banking Revenues: Supported by government aids, which has boosted liquidity for cardholders, higher rates of debt repayment are expected to have hindered loan growth and affected lending volumes.
The consensus estimate for revenues of $1.7 billion suggests a marginal fall from the previous quarter’s reported number.
Low Net Interest Income: The overall lending scenario has been stable in the second quarter, with commercial real estate, consumer loan, and loan and lease activities expected to have lent support to interest income growth.
The consensus estimate for NII of $2.4 billion suggests a 64.8% increase from the previous quarter’s reported number.
Here is what our quantitative model predicts:
Our proven model shows that Goldman has the right combination of the two key ingredients — a 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 +5.82%.
Zacks Rank: It currently carries a Zacks Rank #3.
The Zacks Consensus Estimate for earnings of $9.21 indicates a 47.1% rise from the year-ago reported number, while that for revenues of $11.1 billion suggests a 16.7% year-over-year decline.
Other Banks Worth a Look
Here are some other stocks you may want to consider, as according to our model these too have the right combination of elements to post an earnings beat this quarter.
Wells Fargo & Company (WFC - Free Report) is slated to report quarterly earnings on Jul 14. The company, which carries a Zacks Rank of 3 at present, has an Earnings ESP of +1.19%.
U.S. Bancorp (USB - Free Report) is slated to report quarterly earnings on Jul 15. The company, which carries a Zacks Rank of 3 at present, has an Earnings ESP of +0.74%.
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The biotech sector is projected to surge beyond $775 billion by 2024 as scientists develop treatments for thousands of diseases. They’re also finding ways to edit the human genome to literally erase our vulnerability to these diseases.
Zacks has just released Century of Biology: 7 Biotech Stocks to Buy Right Now to help investors profit from 7 stocks poised for outperformance. Our recent biotech recommendations have produced gains of +50%, +83% and +164% in as little as 2 months. The stocks in this report could perform even better.
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Will Subdued Trading Volumes Mar Goldman's (GS) Q2 Earnings?
While investment banks have reaped the benefits of elevated trading volumes across asset classes over the past five quarters, market normalization and reduced volatility in the second quarter are expected to have dampened capital markets’ revenue growth.
This, in turn, is expected to have hindered Goldman Sachs’ (GS - Free Report) second-quarter 2021 earnings, slated to be released on Jul 13, before market open.
Over the trailing four quarters, the company’s earnings have surpassed the consensus estimate on all four occasions, the positive surprise being 73.5%, 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
While Federal Reserve’s continued bond-buying program is likely to have supported fixed-income trading volumes, low volatility is anticipated to have impacted equity volumes.
The Zacks Consensus Estimate of $2.4 billion for net revenues in Fixed Income, Currency and Commodities Client Execution suggests a 38.4% fall from the previous quarter’s reported number. The consensus estimate of $2.5 billion for total equity revenues indicates a plunge of 32.9% sequentially.
Notably, Goldman’s asset management business is expected to have put up a decent performance in the reported quarter. Higher market gains are likely to have driven inflows from the asset management business. Also, improvement in the prices of asset values is anticipated to have aided asset management fees.
Other Factors at Play
Impressive Investment Banking Fees: Global merger and acquisition (M&A) activity trends have been robust in the quarter under review as dealmakers across the globe were active during this period, with a rise in M&A deal value and volume. This was likely driven by the low-interest-rate environment and efforts to avoid transactions getting taxed at a higher rate later, given President Joe Biden's proposed tax hikes.
Goldman’s IPO activities have been impressive in the second quarter, while strength equity underwriting, as companies tried to shore up liquidity to tide over the pandemic-induced crisis, is likely to have aided fee growth from equity capital markets. Given the favorable market sentiment and the company’s fortified market presence, Goldman is well-poised to have seen a positive impact on its advisory fees.
However, after a sizable incremental SPAC issuance activity in the previous quarter, the SPAC listings have declined significantly in the quarter under review. This is expected to have affected the company’s investment banking fees.
The consensus estimate for investment banking fees of $3.1 billion indicates a 17.6% sequential decline.
Consumer Banking Revenues: Supported by government aids, which has boosted liquidity for cardholders, higher rates of debt repayment are expected to have hindered loan growth and affected lending volumes.
The consensus estimate for revenues of $1.7 billion suggests a marginal fall from the previous quarter’s reported number.
Low Net Interest Income: The overall lending scenario has been stable in the second quarter, with commercial real estate, consumer loan, and loan and lease activities expected to have lent support to interest income growth.
The consensus estimate for NII of $2.4 billion suggests a 64.8% increase from the previous quarter’s reported number.
Here is what our quantitative model predicts:
Our proven model shows that Goldman has the right combination of the two key ingredients — a 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 +5.82%.
Zacks Rank: It currently carries a Zacks Rank #3.
The Zacks Consensus Estimate for earnings of $9.21 indicates a 47.1% rise from the year-ago reported number, while that for revenues of $11.1 billion suggests a 16.7% year-over-year decline.
Other Banks Worth a Look
Here are some other stocks you may want to consider, as according to our model these too have the right combination of elements to post an earnings beat this quarter.
The Earnings ESP for PNC Financial Services Group (PNC - Free Report) is +6.26% and it carries a Zacks Rank of 3 at present. The company is scheduled to report quarterly numbers on Jul 14. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Wells Fargo & Company (WFC - Free Report) is slated to report quarterly earnings on Jul 14. The company, which carries a Zacks Rank of 3 at present, has an Earnings ESP of +1.19%.
U.S. Bancorp (USB - Free Report) is slated to report quarterly earnings on Jul 15. The company, which carries a Zacks Rank of 3 at present, has an Earnings ESP of +0.74%.
Breakout Biotech Stocks with Triple-Digit Profit Potential
The biotech sector is projected to surge beyond $775 billion by 2024 as scientists develop treatments for thousands of diseases. They’re also finding ways to edit the human genome to literally erase our vulnerability to these diseases.
Zacks has just released Century of Biology: 7 Biotech Stocks to Buy Right Now to help investors profit from 7 stocks poised for outperformance. Our recent biotech recommendations have produced gains of +50%, +83% and +164% in as little as 2 months. The stocks in this report could perform even better.
See these 7 breakthrough stocks now>>