earnings estimates

Second-quarter earnings still a question mark

Thu, 15 May 2008 06:59:55 -0400

Goldman Sachs analyst William Tanona has reduced his second-quarter earnings estimates at Bear Stearns, Lehman Brothers and Morgan Stanley, notes the AP. For the second-quarter, the sources of reduced earnings growth likely will shift. The key contributors this time will not be writedowns from troubled securities, CDOs and leveraged loans. Rather, it will come from weakness in core business lines, such as investment banking and principal and proprietary trading. As noted previously, losses from credit spreads on their own debt (a fair value issue) will lead to losses, even though there might be write-ups from other securities (see previous item). All in all, he also believes that on a valuation basis, top banks are now a good buy.

For more:
- here's the AP article

What's up with Bear Stearns?

Fri, 14 Mar 2008 07:59:57 -0400

Rumors have been swirling around Bear Stearns for the longest time. But they really kicked into high gear this week when the stock fell 20 percent, notes the AP. Prices for its credit default swaps have soared. The firm has tried to put a stop to it. CEO Alan Schwartz put the word out that the bank was comfortable with earnings estimates, and the firm says it does not face liquidity issues. But it can't shake talk that it has been forced to take a lot of collateral from hedge funds that cannot meet margin calls. That collateral, unfortunately, can easily be sold, meaning Bear may get stuck with a lot of worthless paper. Richard Bove of Punk Ziegel tells the AP that the Fed may have been reaching out to Bear when it unveiled plans to swap $200 billion in Treasuries for mortgage debt held by banks.

For more:
- here's the AP article

Related Articles:
More fallout from Bear Stearns hedge fund woes. Article
Bear Stearns joins the layoff parade. Article
Goldman Sachs hits one long, Bear Stearns whiffs. Article
Rumor: Bear Stearns looking to replace Cayne. Article

More pessimism about Goldman Sachs' Q1

Thu, 21 Feb 2008 06:59:57 -0500

Citi analyst Prashant Bhatia has joined the herd of other analysts who are cutting first-quarter earnings estimates for Goldman Sachs, Lehman Brothers and Morgan Stanley. He figures a variety of writedowns will take a toll. Although people have been talking about leveraged loan writedowns in the case of Goldman Sachs, only $1 billion of Bhatia's predicted $2.7 billion writedown comes from declining leverage loans. Commercial holdings may also be a weak spot. Bhatia cut his earnings estimate for Goldman Sachs to $3.70 per share from $6.70 per share.

Other analysts are even more pessimistic. Lehman Brothers analyst Roger Freeman expects just $2.10 per share. Such disparity for investment banks is not unusual, and I wouldn't be surprised if analysts pared more as the announcement approaches.

For more:
- here's an AP brief

Related articles:
Weak first quarter expected from Goldman Sachs. Report
Goldman Sachs hedge fund woes continuing? Report
Troubling credit forecast from Goldman Sachs. Report
Lehman earnings set negative tone. Report

Earnings bomb from Morgan Stanley

Wed, 19 Sep 2007 06:59:59 -0400

Well, Lehman Brothers got the earnings derby off to a decent start. That raised hopes for other investment banks. Morgan Stanley, however, posted 3Q earnings that were 10 cents shy of already reduced earnings estimates. The credit crunch took a toll. John Mack, CEO, noted the "impact" on "credit products, leveraged lending and quantitative strategies businesses." Investment banking offset the losses somewhat. But the real differentiator may be that Morgan hedges didn't work out quite like Lehman Brothers' did. Here's an AP article. More will dribble out about this all day. Stay tuned for more earnings news.
- Jim

All eyes on Wall Street earnings

Fri, 14 Sep 2007 06:59:58 -0400

The conventional wisdom on the top banks is that while the credit crunch will eat away at third-quarter earnings, out-and-out disasters will likely be averted. Many analysts have lowered their earnings estimates for the big guns. But investment bank earnings are hard to call. The most anxiety surrounds Bear Stearns for obvious reasons. That said, the recent hedge fund implosions will likely be more profound for fund investors than Bear itself. According to MarketWatch, rumor are rife that Lehman did well in fixed-income trading and Goldman Sachs did fine in equities. But no one will really know until next week. Lehman kicks things of on Monday. Morgan Stanley, Bear Stearns and Goldman Sachs will follow suit through the week.

For more:
- here's the MarketWatch preview

Bulls vs. bears battle breaks out over banks

Wed, 29 Aug 2007 06:59:57 -0400

Seems like the bulls are winning the moment. The credit crisis has really staggered bulge bracket-type bank stocks as of late. And the hits keep coming. Merrill analyst Guy Moszkowski downgraded Bear Stearns, Lehman Brothers and Citigroup. Goldman Sachs lowered its third-quarter earnings estimates on three top banks. It's fair to say that there's a lot of uncertainty out there. But there is the view that most of the bad news has been built into current prices, which means there might be an opportunity at hand. The third quarter is closing, and in a few weeks, we'll get a good idea how deep the damage runs. To complicate matters, there is a huge wild card looming. Is the Fed poised to cut the federal funds rate? Any other liquidity-adding moves in the offing? Such actions, if you go by history, might goose the stocks significantly.

For more:
- here's a MarketWatch article on the rate-cut implications
- here's an article from CNNMoney.com about the industry's prospects

Bear earnings weak, Goldman beats estimates

Wed, 13 Jun 2007 20:01:37 -0400

Bear Stearns seemed to confirm that all the worrying was justified. It missed estimates by a decent margin, driven by poor results in fixed income trading and a large writedown. There has been a lot of hand-wringing over whether Bear was having a tougher time weathering the subprime mess, which clearly have hit its bond operations. As for Goldman Sachs, it beat the revenue and earnings estimates yet again, albeit by a smaller margin than we're used to. Investment banking and principal investments remain strong. But the growth has slowed from the near impossible growth rates the firm threw up last year. So the early take may be that the industry remains strong but that there are finally signs that meteoric surge is finally starting to moderate. This has been the conventional wisdom for a while, and now it seems more justified.

For more:
- here's the Bear Stearns release
- here's the Goldman Sachs release

Top Wall Street banks get upgrade

Tue, 21 Nov 2006 19:01:34 -0500

After every quarter, we seem to ask: How long can the good times last? There was a sense earlier this year that the time was ripe for moderation. But here we are at the end of 2006 and the prospects for the top investment banks seem even rosier. Punk Ziegel analyst Dick Bove raised his ratings and boosted his earnings estimates for the big names: Bear Stearns, Goldman Sachs, Morgan Stanley, Merrill Lynch and the like. Like others, he is not oblivious to all the financial sponsor deal making going on. In addition, the stock market has rallied, holding out the hope for more offerings. The debt market is also humming. So the good times are rolling right along.

For more on this:
- Here's a brief from TheStreet.com

Commercial banks heading in different directions?

Thu, 19 Oct 2006 20:01:34 -0400

The top commercial-oriented banks have not surprised anyone with their earnings. Citigroup beat earnings estimates but missed revenue estimates; the general take was that this was not a strong showing. Citigroup's corporate and investment banking division, which has been strong elsewhere in the industry, lagged expectations. However, consumer banking business, which had been a concern, came in okay. Bank of America fared much better--its MBNA deal is paying off. It also beat earnings estimates. This follows JPMorgan's generally strong reports. The big theme is that consumer operations held up okay, but it's unclear if this will continue. The market is treating everything like pieces of the same clothe.

For more on earnings:
- Here's an article on Citigroup from MarketWatch
- Here's one on Bank of America from AP

Top i-bank stocks still rising

Mon, 21 Aug 2006 20:01:36 -0400

Are investment bank stocks acting weird? Some think so. The Amex Securities Broker Dealer Index has risen nearly 10 percent over the last month, despite a weak summer for investment-banking work and the lowering of third-quarter earnings estimates by analysts. We'll see if the merger activity comes back with a bang as many bet it will. The other wildcard, of course, is proprietary activity. It could sink or save some of these companies.

For more on i-bank stocks:
- Here's an article from TheStreet.com.