Earnings Preview: Goldman Sachs Group Inc.

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NEW YORK -Goldman Sachs Group Inc. reports third-quarter financial results on Thursday. The following is a summary of key developments and analyst opinion related to the period.

OVERVIEW: Long considered the strongest bank on Wall Street, Goldman again flexed its muscles in the second quarter when it posted a $2.7 billion profit. While analysts expect a slight slowdown from that pace amid a seasonal decline and a move toward a more normalized market, profit should still be strong in the third quarter at the New York-based bank.

Goldman is among the most aggressive traders on Wall Street and that trend is likely to continue. It has used its strong reputation to generate underwriting and investment banking revenue and continues to be on the right side of bets in fixed income, commodities and currency markets.

Credit Suisse analyst Howard Chen wrote in a research note that Goldman has a "best-in-class franchise with solid market position across myriad businesses and (a) strong balance sheet."

Indeed, Goldman was able to easily repay $10 billion in government bailout money earlier this year as it posted its second-quarter profit.

BY THE NUMBERS: Analysts surveyed by Thomson Reuters predict Goldman Sachs will earn $4.24 per share on revenue of $11.02 billion.

Goldman earned $810 million, or $1.81 per share, during its fiscal third quarter in 2008, which ended Aug. 29. Revenue totaled $6.04 billion during the quarter.

As part of its switch to become a bank holding company late last year amid the peak of the credit crisis, Goldman changed its reporting schedule to calendar quarters.

ANALYST TAKE: FBR Capital Markets analyst Steve Stelmach said the seasonal summer slowdown in trading and equity markets activity will make third-quarter results look a little weaker than the second. However, that's more an indication of how "phenomenal" the second quarter was and not necessarily weakness in the third quarter, Stelmach added.

Stelmach estimates Goldman will earn $4.02 per share in the third quarter.

WHAT'S AHEAD: Deutsche Bank analyst Michael Carrier said Goldman should see further improvement in the coming quarters as the market continues to recover.

"The outlook for capital markets activity is mostly favorable for the industry, and even more favorable for Goldman Sachs given their positioning and recent market share gains. For the industry, investment banking activity is highly correlated to GDP growth, CEO and market confidence, and availability of funds, and given that each of these drivers is improving, the outlook for industrywide investment banking activity and revenues is favorable," Carrier wrote in a research note.

STOCK PERFORMANCE: Shares of Goldman Sachs rose 25 percent during the third quarter. Both the Dow Jones industrial average and the broader Standard & Poor's 500 indexes gained 15 percent during the third quarter.

2009-10-14 13:29:59