Goldman Sachs: Earnings Home Run Winner
Goldman blew past earnings expectations, reporting fourth-quarter earnings available to common shareholders of $2.833 billion, or $5.60 a share, with analysts polled by Bloomberg estimating that earnings would come in at $3.66 a share.
The firm's earnings increased from $1.458 billion, or $2.85 a share in the third quarter, and $978 million, or $1.84 a share, in the fourth quarter of 2011, with large increases in both debt and equity underwriting revenue; continued strength in institutional client servicing revenue, which was up 4% sequentially and 42% year-over-year to $4.342 billion; and increases of 9% sequentially and 126% year-over-year in investing and lending revenue, to $1.973 billion.
Credit Suisse analyst Howard Chen reiterated his "Outperform" rating for Goldman following the earnings announcement, while raising his price target for the shares by $15 to $160, saying "the beat was fairly broad based--better than expected investment banking, stronger FICC results, more in the way of principal investment gains/realizations and higher investment management revenues all supported by continued strong expense and capital management discipline."
Chen called the results "a solid end to the year for Goldman--2012 represented the first year of core revenue growth since 2009 with the firm achieving a 10%+ return on equity amidst a still challenging market backdrop."
JPMorgan Chase (JPM) also beat analysts' expectations with a fourth-quarter profit of $5.7 billion, or $1.39 a share, while the consensus estimate among analysts polled by Thomson Reuters was $1.16. The company's shares rose 1% to close at $46.82. Please see TheStreet's earnings coverage for additional detail on JPMorgan's quarterly and annual results.
A Mixed Market
The broad indexes ended mixed as shares of Apple (AAPL) recovered over 4% to close at $606.09, although shareholders will have to wait until next Wednesday for the company to announce results for its fiscal first quarter, ended Dec. 31.
Apple's shares look quite inexpensive, trading for 10.5 times the consensus fiscal 2013 EPS estimate of $48.34. It's not surprising that investors are jittery heading into earnings, as a slew of EPS estimate revisions will follow.
Pacific Crest Securities analyst Andy Hargreaves on Wednesday downgraded Apple to "Sector Perform" from "Outperform," saying that "high-end smartphone and tablet markets are rapidly approaching saturation, which, along with waning demand for incremental hardware innovation, is likely to pressure Apple's profit growth in the coming years." Hargreaves lowered his earnings estimate for the fiscal first quarter to $14.65 from $14.79, while lowering his fiscal 2013 EPS estimate to $41.85 to $45.13, and his fiscal 2014 EPS estimate to $43.92, to $47.70.
The analyst estimated a fair value for Apple's shares of between $440 and $550 over the next 12 months, and said that "on the upside, we believe continued strong demand for iPad and a modestly improved overall profit growth outlook exiting F2013 could support multiples that are on par with where AAPL traded exiting 2012, which was around 13x trailing-12-months EPS."