Goldman Sachs (GS) - Get Goldman Sachs Group, Inc. Report first-quarter results are likely to show some weakness in equity trading, as the "Trump trade" faltered during the first-quarter, but equity raises and initial public offerings should help offset any weakness, according to analysts.
Oppenheimer analyst Chris Kotowski noted that it's likely a "business as usual" outlook for the financial stocks, highlighting the recent fed funds rate hikes from the Federal Reserve, as well as some slowing loan growth, themes which have been common in recent years.
But despite the run-up since the election, bank stocks are still cheap compared to historical averages, especially at a time when the Fed appears as if it's going to embark on multiple rate hikes. "At a ~70% relative P/E multiple, the stocks are slightly cheap vs. historical averages at a time when the blessings of higher rates are just beginning," Kotowski wrote in an investor note. "Thus, we would continue to modestly overweight the banking sector. Our favorite stocks are BAC, C, CIT and GS."
Analysts surveyed by Yahoo! Finance expect the company to earn $5.31 a share on $8.45 billion in revenue for the period.
Over the past 12 months, shares of Goldman Sachs have gained nearly 42% excluding dividends, compared to the near 11% gain in the S&P 500.
Here are five ETFs that may benefit if investors like Goldman's first-quarter results.
iShares U.S. Broker-Dealers & Securities Exchanges ETF
The $158.4 million iShares U.S. Broker-Dealers & Securities Exchanges ETF (IAI) - Get iShares U.S. Broker-Dealers & Securities Exchanges ETF Report has Goldman make up 10.49% of its portfolio, charging investors an expense ratio of 0.43%.
Credit Suisse analyst Christian Bolu thinks that Goldman will have weakness in its institutional sales and trading arms, but its capital raising unit should help offset most of the weakness.
"Our target price remains $260, implying shares can trade at 1.3x our forecasted 2017BV and 14x 2017E EPS, in sync with expected return on equity of 9.9% through 2017," Bolu wrote in a note to investors. "Risks to achievement of this target price are largely tied to earnings, the macro outlook, and GS's ability to increase its capital returns."
SPDR Dow Jones® Industrial Average ETF
The $16.04 billion SPDR Dow Jones® Industrial Average ETF (DIA) - Get SPDR Dow Jones Industrial Average ETF Report has Goldman make up 7.59% of its portfolio, charging investors an expense ratio of 0.17%.
Oppenheimer's Kotowski thinks that Goldman's first-quarter results will be aided by a $450 million tax benefit, as well as higher investment banking and investing & lending revenue, with trading revenue potentially being soft.
"Again, our view is that the full-year trading results are likely to be more stable than those in any given quarter, and that is why we would not make a great deal out of a weaker than previously expected 1Q17," Kotowski wrote to investors. Over time, we still think that rising rates will be good for FICC trading."
Oppenheimer has a $266 price target and an outperform rating on Goldman shares.
PowerShares BuyBack Achievers Portfolio ETF
The $259.9 million PowerShares BuyBack Achievers Portfolio ETF (PKW) - Get Invesco Buyback Achievers ETF Report has Goldman make up 4.19% of its portfolio, charging investors an expense ratio of 0.68%.
Credit Suisse is particularly bullish on Goldman Sachs shares, with the price target nearly 15% higher than where shares are trading, due in part to strong return on equity, but there are also plenty of risks involved.
"Risks to our $260 target price and Outperform rating for Goldman Sachs are weaker than expected global economic growth and market conditions, management turnover, litigation risk, and more onerous regulation," the firm said.
iShares U.S. Financial Services ETF
First Trust Mega Cap AlphaDEX Fund