Goldman breaks its own rule to tip results much worse than rivals
Rarely has Goldman Sachs Group worked so hard to unimpress.
The Wall Street giant has embraced a new game plan to avoid a third straight quarter of disappointing investors on earnings day. Breaking with its own long-standing convention, Goldman executives have been actively downplaying expectations for results that will be disclosed next week.
The average estimate for earnings per share at Goldman is just $US3.94, with some recent projections below $US3. Reuters
The outcome: Analysts have slashed their estimates for quarterly profit by almost half since mid-June — the biggest revision before an earnings report under chief executive officer David Solomon. That translates into one of the steepest profit drops among peers, and a return on equity that could slip below 5 per cent.
“This is likely the worst quarter since David Solomon became the CEO,” Mike Mayo, a Wells Fargo & Co. analyst, said in an interview. “There’s probably half a dozen items this quarter that fall into the weak, bad or ugly category.”
Over the past six weeks, Goldman has signalled a 25 per cent slowdown in trading revenue, highlighted material markdowns in its real estate book, and said it will take a hefty writedown as it sells the Greensky lending platform — a vestige of its botched foray into consumer banking. It’s practically a pre-announcement of earnings without calling it that, Mayo said.
The abundance of information may relieve pressure on the stock when Goldman posts results July 19. The bank’s shares dropped 6 per cent on its earnings day in January and underperformed rivals again in April — awkward moments for a firm trying to make the case that strategic missteps are behind it.
This is the “first time in quite a while they have provided some
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