For all its criticisms, if there is one thing one can say about Goldman, is that unlike their pathetic TBTF cousins in the US financial industry (JPMorgan, Citi, and shortly Morgan Stanley and Bank of Countrywide Lynch), it can report a loss like a man. Which, in less than 24 hours, it may have to do, for only the second time since its 1999 IPO. As Bloomberg notes, tomorrow the market expects the vampire squid to announce at 8:00am Eastern that it had a loss driven by lower revenues and debt and equity marks. Also, unlike the "others", we are confident Goldman will not hide behind such blatant accounting gimmicks as DVA and loan loss reserve releases (the second because the firm never got into the lending business... on the other hand, the FDIC-insured bank also has yet to open any ATMs, making one wonder just why it continues to have taxpayer backing as a bank holding company, but we digress). Here is what to expect tomorrow from Viniar and Blankfein, courtesy of Bloomberg. Naturally the one thing nobody expects is the announcement of a succession event at the top. Considering the recent step function in popular "appreciation" of financial innovation, we believe a Blankfein phase-out announcement could be in the works. One thing is certain: Ferrari dealerships will not be happy come Christmas as bonuses this year will be poor to quite poor, if any.
* 3Q loss est. 11c (down $1.61 last 4 weeks), range ($1.02)-$1.22
* 3Q rev. $4.37b (down $2.33b last 4 wks), range $3.70b-$5.52b
WHAT TO WATCH:
* Lower Q/q revs: trading (FICC, equity), investment-banking on lower equity underwriting, asset management on lower markets
* Debt/equity, (ICBC) marks: BofA analyst sees markdowns in investment & lending debt/equity (62c), ICBC (40c)
* Negative oper. leverage given rev. pressure: JMP analyst sees comp. ratio flat at 44%, non-comp. exp. ratio at 44% vs 34% Q/q
* GS has beat EPS ests. 5 of last 8 qtrs, rev. 4 of last 8 qtrs.
* GS has fallen 3 of last 5 days after earnings; options imply 1 day move 4.6%
* GS down 43% YTD to $96.21; watch 10-DMA ($96.05), 20-DMA ($96.48), 50-DMA ($105.14)
* Peer multiples to tangible book: GS 0.79x, BAC 0.48, C 0.58x, JPM 0.95x, MS 0.56x
* GS has 17 buys, 12 holds, 2 sells; avg. PT $145.50 implies 51% upside
* NOTE: July 16, day prior to 2Q earnings, GS had avg. PT of $178 with 66% upside, with 20 buy, 7 hold, 3 sell ratings
TIMING: GS reports ~8am (last 3 times 8:00am, 8:02am, 8:02am); call 9:30am 888-281-7154
Source: Bloomberg First Word News