Goldman Sachs Earnings Preview – Second Quarter 2009

Goldman Sachs [[GS]] is scheduled to report their second quarter 2009 results before the market opens on Tuesday, July 14. Based on our analysis, we at are expecting GS to report better than expected results that exceed Wall Street’s consensus expectations.


Analyst Expectations

We are forecasting revenues of $42.93 billion and EPS of $3.69. This would represent an 8% decline in revenues from last year’s $46.89 billion in the same period. The current analyst consensus estimates calls for revenues of $42.31 billion and EPS of $.23.


While the global economy continues to struggle, the financial markets showed some signs of stabilization in the second quarter with the Dow Jones industrial average gaining 11%. The improving capital markets should benefit Goldman Sachs and allow it to improve on their first quarter performance which also topped Wall Street’s expectations.


Looking ahead, Goldman Sachs remains one of our top picks in the financial sector. Wall Street expects Goldman to grow earnings by 10% next year. We feel that 10% growth could be conservative if the economy begins to recover again later this year.


Share Performance

Since the beginning of the year, Goldman Sach’s shares are up over 63%. In 2008, GS’s shares fell 61% and badly underperformed the 34% decline in the Dow Jones industrial average.



Shares are now trading at 10x consensus 2010 EPS estimates. This is below the relative valuations of their peer group. While Goldman’s shares have experienced a nice rally this year, we expect the stock could go even higher over the next 12 months and would be buyers on any pullbacks.


Recommendation: Buy with a $170 price target.


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