The Goldman Sachs Group, Inc. (GS - Analyst Report) is scheduled to report third-quarter 2016 results on Oct 18.
Goldman’ second-quarter 2016 earnings beat the Zacks Consensus Estimate and improved year over year as well. Results were primarily aided by lower operating expenses and higher fixed income revenues. However, a reduced number of completed mergers and acquisitions, along with a decline in equity trading revenues, were on the downside.
Interestingly, Goldman delivered positive earnings surprises in three of the trailing four quarters with an average earnings beat of 11.4%. Regarding the stock’s performance, the company has gained more than 5% over the last three months.
GOLDMAN SACHS Price and EPS Surprise
Will the upcoming earnings release give a further boost to Goldman’s stock? This majorly depends whether the firm is able to post a beat for the fourth straight quarter. Notably, our quantitative model also doesn’t point to an earnings beat. Here’s why:
Goldman doesn’t have the right combination of the two key ingredients – a positive Earnings ESP and a Zacks Rank #1 (Strong Buy) or at least 2 (Buy) or 3 (Hold) – for increasing chances of an earnings beat.
Zacks ESP: The Earnings ESP for Goldman is -0.26%. This is because the Most Accurate Estimate of $3.85 is less than the Zacks Consensus Estimate of $3.86.
Zacks Rank: Goldman‘s Zacks Rank #3 increases the predictive power of ESP. However, we also need to have a positive ESP to be confident of a positive earnings surprise.
Factors to Influence Q3 Results
The economic environment continued to remain challenging in the third quarter with low interest rates, political uncertainty and global growth concerns.
During the third quarter, trading environment was decent as global financial markets experienced volatility due to several factors, including the Brexit vote. Fixed Income, Currency and Commodities Client Execution, which is one of the major sources of Goldman’s revenues and contributes to its institutional client services revenues, should support the company’s top line given such a favorable market backdrop. Trading in equities is likely to typically remain subdued due to lower client activity.
However, the company is not likely to record significant revenues from advisory and underwriting, as M&A activities and IPOs continued to decline during the quarter in the wake of global economic concerns.
The company’s efforts to keep costs at check should support its bottom-line growth. Moreover, there were no major outflows related to legal settlements that might affect the firm’s earnings unusually in the to-be-reported quarter.
Activities of Goldman during the quarter were inadequate to win analysts’ confidence. As a result, the Zacks Consensus Estimate for the quarter declined nearly 1% to $3.86 per share over the last seven days. However, the estimated figure represents a year-over-year growth of almost 33%.
Stocks that Warrant a Look
Here are some stocks worth considering, as they have the right combination of elements to post an earnings beat this quarter.
BlackRock, Inc. (BLK - Analyst Report) has an Earnings ESP of +0.20% and carries a Zacks Rank #2. The company is slated to release results on Oct 18. You can see the complete list of today’s Zacks #1 Rank stocks here.
Raymond James Financial, Inc. (RJF - Analyst Report) has an Earnings ESP of +2.04% and carries a Zacks Rank #2. The company is slated to release results on Oct 26.
Lazard Ltd. (LAZ - Analyst Report) has an Earnings ESP of +3.90% and carries a Zacks Rank #2. It is scheduled to report results on Oct 27.
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