This Day On The Street
Continue to site
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Goldman Sachs, Morgan Stanley May Miss Estimates, Analyst Says

NEW YORK ( TheStreet) -- Market expectations for second-quarter earnings from Goldman Sachs (GS - Get Report) and Morgan Stanley (MS - Get Report) may still be too high, according to Citigroup analyst Keith Horowitz.

A tough June month has "erased optimism" about a strong start to the second quarter, the analyst said in a note Tuesday. He lowered his second-quarter earnings estimate for Goldman Sachs by 40 cents to $2.70, well below the $2.83 consensus estimate reported by Thomson Reuters. The analyst expects Goldman to miss consensus, as its investing and lending portfolio is likely to have been hurt by the "recent correction in risk assets."

Morgan Stanley is also likely to miss the consensus earnings estimate of 45 cents per share by 3 cents, according to Horowitz, though this is largely because the buyout of the Morgan Stanley Smith Barney joint venture is being completed later than expected.

Horowitz's views appear to be shared by Atlantic Equities analyst Richard Staite, who earlier this week lowered his estimates for Goldman and Morgan Stanley to $2.70 per share and 42 cents per share respectively.

Estimates are also off for JPMorgan Chase (JPM - Get Report), according to Horowitz, though in this case the bank could surprise on the upside. The analyst notes that consensus estimates are still to factor in management's guidance of mortgage loan loss reserves, which is expected to add 11 cents to earnings per share.

JPMorgan is likely to report earnings of $1.63 per share, according to Horowitz, while consensus expects a much lower $1.42 a share.

The analyst's estimates for Bank of America (BAC - Get Report) and Lazard (LAZ - Get Report) at 27 cents per share and 33 cents per share are modestly ahead of the market's expectations.

Analysts will probably continue to adjust their estimates in the next few days, ahead of the earnings season which kicks off next week.

Investors are likely to give banks a pass for a tough trading quarter, however, and may be more focused on the outlook for banks now that interest rates are heading higher.

JPMorgan and Bank of America may benefit the most, according to the Citigroup analyst. Both banks have noted previously that a 100 basis point increase in the long-end of the yield curve with flat short-term rates will add $900 million and $1.6 billion respectively to net interest income over the next 12 months.

Also if higher rates are signaling a strong economy ( and not just fears about the end of monetary stimulus by the Fed), this could lead to increased capital market activity, benefiting Goldman, Morgan Stanley and Lazard, according to Horowitz.

-- Written by Shanthi Bharatwaj New York.

>Contact by Email.

Disclosure: TheStreet's editorial policy prohibits staff editors and reporters from holding positions in any individual stocks.

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
SYM TRADE IT LAST %CHG
BAC $15.56 -0.51%
GS $196.52 -0.74%
JPM $62.34 -0.42%
LAZ $54.31 -2.83%
MS $37.05 -0.83%

Markets

DOW 18,037.97 -42.17 -0.23%
S&P 500 2,108.92 -8.77 -0.41%
NASDAQ 5,060.2460 -31.8390 -0.63%

Partners Compare Online Brokers

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs