NEW YORK (
are experiencing a weak business environment, according to Rochdale Securities analyst Richard Bove, who cut his 2010 earnings estimates for both companies late in Friday's session.
"Business is not good at the moment. The equity markets are performing poorly. The high yield markets have been cut back meaningfully. The strength exhibited earlier in currencies, rates, energy and metals is dissipating," Bove wrote in his Morgan Stanley report.
He sounded a similar note on Goldman Sachs, while also citing concerns about upcoming regulation and the need for Goldman to settle the civil fraud charges brought against it in mid-April by the Securities and Exchange Commission.
Bove retained his "Buy" rating on both companies, but cut his price targets on shares of Morgan Stanley and Goldman to $35 from $41, and $182 from $200, respectively. Morgan Stanley was down 2.6% to $26.15 with less than an hour left in trading, while Goldman was down 0.67% to $143.07. Shares of both companies dipped slightly following news of the lower estimates.
Bove now expects Goldman Sachs to earn $17.17 a share in 2010, down from $18.72, and he projects a profit of $2.95 a share from Morgan Stanley compared to a prior view of $3.37.
The current average estimates of analysts polled by
is for earnings of $19.57 a share from Goldman, and $3.19 a share from Morgan Stanley.
Also on Friday afternoon, Sandler O'Neill analyst Jeff Harte lowered his 2010 earnings per share estimates on Goldman by $2.32 per share to $17.83 following a meeting with management. Harte retained his "Buy" rating and $203 price target on the stock, but echoed Bove's sentiment about current business conditions.
"The operating environment has become quite difficult in recent weeks," he told clients in a research note, adding that Goldman CFO David Viniar indicated he believes that "fear and uncertainty surrounding the overhaul of financial regulation and economic challenges in Europe have left market participants in a state of paralysis in recent weeks."
Harte adds that Goldman's Viniar believes resolution of financial reform legislation could kickstart the markets, as he expects the final version of the bill "to be less of a threat to economic growth than the market is currently pricing."
Written by Dan Freed in New York