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Will Low Underwriting Volume Ail Goldman's (GS) Q1 Earnings?
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The Goldman Sachs Group, Inc. (GS - Free Report) is slated to release first-quarter 2022 earnings on Apr 14, before market open. The company is expected to have witnessed year-over-year declines in revenues and earnings.
In the previous quarter, Goldman’s earnings per share of $10.81 lagged the Zacks Consensus Estimate of $12.10. Lower fixed income, currency and commodities revenues affected the results.
Over the trailing four quarters, the company’s earnings have surpassed the consensus estimate on three of the four occasions and missed in the other, the surprise being 45.9%, on average.
The Goldman Sachs Group, Inc. Price and EPS Surprise
Due to the Russia-Ukraine conflict, implied interest rate, FX and commodity volatility spiked up in the last month of the quarter. This is likely to have set the stage for robust interest rates, commodities and FX product volumes. However, the credit business remained challenged with spread widening and lower volumes.
Amid the backdrop, the Zacks Consensus Estimate of $5.65 billion for net revenues in the Global Markets segment suggests a 25.5% fall from the prior-year quarter’s reported number.
Other Factors at Play
Investment Banking (IB) Fees: In stark contrast to the past several quarters, deal-making considerably reduced in first-quarter 2022. Also, a drop in investment banking activity due to subdued capital markets, and a decline in equity and debt issuance deal volume were seen. High market volatility, triggered by the Ukraine crisis, and uncertainty regarding an economic slowdown tied to inflation created headwinds in the March-end quarter.
While Goldman’s leading position in announced and completed mergers and acquisitions is expected to have aided the company to record related fees, low equity and bond volumes are anticipated to have hindered over fees. The consensus estimate for IB fees of $2.6 billion indicates a 31.2% year-over-year decline.
Net Interest Income (NII): Per the Fed’s latest data, loan demand — particularly residential real estate loans, consumer loans, and commercial and industrial loans — remained strong in January and February.
However, the momentum is likely to have been affected as the first quarter is seasonally slow for loan originations.The flattening of the yield curve (the difference between short and long-term interest rates) is likely to have hindered GS’ margins. Also, fewer days during the quarter are likely to have affected NII.
Asset Management Business: Amid the macroeconomic uncertainty and fears, along with market declines, Goldman’s asset management business is expected to have witnessed outflows in the quarter. Amid the market pullback, the consensus estimate for Goldman’s asset management revenues of $1.43 billion suggests a significant decline from the prior-year quarter’s reported number of $4.61 billion.
Goldman’s Inorganic Moves in Q1
In the last week of March, Goldman closed the previously announced acquisition of GreenSky to augment its retail lending footprint.During the announcement, the deal was expected to generate robust returns on invested capital, with mid-teens IRR accretion for Goldman.
The company’s asset management arm also entered an agreement to acquire robo-advisor NextCapital.The transaction will expand Goldman’s services to the growing defined contribution market through personalized managed accounts and digital advice. Moreover, the buyout will enable GS to leverage the increasing preference for customized solutions for individuals like personalization and target-date funds based on different retirement timelines.
Here is what our quantitative model predicts:
Our proven model does not show 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 this time around.
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 -4.38%.
Zacks Rank: It currently carries a Zacks Rank #5 (Strong Sell).
Prior to the first-quarter earnings release, Goldman’s quarterly activities were inadequate to gain adequate analyst confidence. Notably, the Zacks Consensus Estimate for first-quarter earnings has been revised 6.9% downward to $8.79 over the past week. It suggests a 52.7% year-over-year fall.
Also, the consensus estimate of $11.72 billion for quarterly revenues indicates a 33.8% fall from the prior-year quarter’s reported number.
Stocks That Warrant a Look
Comerica (CMA - Free Report) , M&T Bank (MTB - Free Report) and State Street (STT - Free Report) are a few stocks that you might want to consider as these have the right combination of elements to post an earnings beat in their upcoming releases, per our model.
The Earnings ESP for Comerica is +1.10% and the company carries a Zacks Rank #3 at present. CMA is slated to report first-quarter 2022 results on Apr 20.
The Zacks Consensus Estimate for CMA’s first-quarter earnings has moved north over the past week.
Image: Bigstock
Will Low Underwriting Volume Ail Goldman's (GS) Q1 Earnings?
The Goldman Sachs Group, Inc. (GS - Free Report) is slated to release first-quarter 2022 earnings on Apr 14, before market open. The company is expected to have witnessed year-over-year declines in revenues and earnings.
In the previous quarter, Goldman’s earnings per share of $10.81 lagged the Zacks Consensus Estimate of $12.10. Lower fixed income, currency and commodities revenues affected the results.
Over the trailing four quarters, the company’s earnings have surpassed the consensus estimate on three of the four occasions and missed in the other, the surprise being 45.9%, 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
Due to the Russia-Ukraine conflict, implied interest rate, FX and commodity volatility spiked up in the last month of the quarter. This is likely to have set the stage for robust interest rates, commodities and FX product volumes. However, the credit business remained challenged with spread widening and lower volumes.
Amid the backdrop, the Zacks Consensus Estimate of $5.65 billion for net revenues in the Global Markets segment suggests a 25.5% fall from the prior-year quarter’s reported number.
Other Factors at Play
Investment Banking (IB) Fees: In stark contrast to the past several quarters, deal-making considerably reduced in first-quarter 2022. Also, a drop in investment banking activity due to subdued capital markets, and a decline in equity and debt issuance deal volume were seen. High market volatility, triggered by the Ukraine crisis, and uncertainty regarding an economic slowdown tied to inflation created headwinds in the March-end quarter.
While Goldman’s leading position in announced and completed mergers and acquisitions is expected to have aided the company to record related fees, low equity and bond volumes are anticipated to have hindered over fees. The consensus estimate for IB fees of $2.6 billion indicates a 31.2% year-over-year decline.
Net Interest Income (NII): Per the Fed’s latest data, loan demand — particularly residential real estate loans, consumer loans, and commercial and industrial loans — remained strong in January and February.
However, the momentum is likely to have been affected as the first quarter is seasonally slow for loan originations.The flattening of the yield curve (the difference between short and long-term interest rates) is likely to have hindered GS’ margins. Also, fewer days during the quarter are likely to have affected NII.
Asset Management Business: Amid the macroeconomic uncertainty and fears, along with market declines, Goldman’s asset management business is expected to have witnessed outflows in the quarter. Amid the market pullback, the consensus estimate for Goldman’s asset management revenues of $1.43 billion suggests a significant decline from the prior-year quarter’s reported number of $4.61 billion.
Goldman’s Inorganic Moves in Q1
In the last week of March, Goldman closed the previously announced acquisition of GreenSky to augment its retail lending footprint.During the announcement, the deal was expected to generate robust returns on invested capital, with mid-teens IRR accretion for Goldman.
The company’s asset management arm also entered an agreement to acquire robo-advisor NextCapital.The transaction will expand Goldman’s services to the growing defined contribution market through personalized managed accounts and digital advice. Moreover, the buyout will enable GS to leverage the increasing preference for customized solutions for individuals like personalization and target-date funds based on different retirement timelines.
Here is what our quantitative model predicts:
Our proven model does not show 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 this time around.
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 -4.38%.
Zacks Rank: It currently carries a Zacks Rank #5 (Strong Sell).
Prior to the first-quarter earnings release, Goldman’s quarterly activities were inadequate to gain adequate analyst confidence. Notably, the Zacks Consensus Estimate for first-quarter earnings has been revised 6.9% downward to $8.79 over the past week. It suggests a 52.7% year-over-year fall.
Also, the consensus estimate of $11.72 billion for quarterly revenues indicates a 33.8% fall from the prior-year quarter’s reported number.
Stocks That Warrant a Look
Comerica (CMA - Free Report) , M&T Bank (MTB - Free Report) and State Street (STT - Free Report) are a few stocks that you might want to consider as these have the right combination of elements to post an earnings beat in their upcoming releases, per our model.
The Earnings ESP for Comerica is +1.10% and the company carries a Zacks Rank #3 at present. CMA is slated to report first-quarter 2022 results on Apr 20.
The Zacks Consensus Estimate for CMA’s first-quarter earnings has moved north over the past week.
M&T Bank is scheduled to release first-quarter results on Apr 20. MTB currently has a Zacks Rank #3 and an Earnings ESP of +4.07%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for MTB’s first-quarter earnings has moved south over the past 30 days.
State Street is scheduled to release earnings on Apr 14. The company, which carries a Zacks Rank #3 at present, has an Earnings ESP of +0.68%.
The Zacks Consensus Estimate for STT’s first-quarter earnings has been revised north over the past week.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.