Financials Post Strong Q4 Earnings; Big Beats For Goldman, Wells Fargo

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Financials Post Strong Q4 Earnings; Big Beats For Goldman, Wells Fargo

Financial firms reported strong Q4 earnings, with 42% of financials reporting consensus-beating expectations.

Amanda Sneider and team at Goldman Sachs Group Inc (NYSE:GS) note 63% of financial firms reported top-line results within one standard deviation of consensus expectations.

Financials beat earnings expectations

Analyzing the Q4 2013 results announced till January 17, 2014, the Goldman analysts point out that 42% of financial firms beat consensus earnings expectations by over one standard deviation as credit and lower tax rates helped the bottom-line. The following table captures the strong performance by the financials:

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Moreover, the percentage of financials beats is higher than the rest of the S&P 500. As can be deduced from the following table, excluding financials, 33% of S&P 500 companies beat consensus earnings expectations by the same magnitude.

Strong performance by financials

Goldman, WFC post strong results

Recently a host of banks reported solid results. Goldman Sachs posted strong I-banking and in-line investment management results. Ex DVA, Goldman reported Q413 EPS of $4.87 vs Citi’s est of $4.37. Stronger than expected top line on comp adjusted basis was $1.33 better than Citi’s estimate (of which I&L was $0.69), plus comp accrual was better which added $0.46. So, Citi believes that core results were close to $1.80 better than expected, of which better than expected Investing & Lending accounted for about 40% of the beat.

Wells Fargo & Co (NYSE:WFC) the largest U.S. home lender, reported a 24% rise in fourth-quarter earnings as the bank extended more credit.  Net income advanced to a record $5.09 billion, or 91 cents a share, from $4.11 billion, or 73 cents, a year earlier, the San Francisco-based bank reported last week. Results beat the 89-cent average estimate of 27 analysts surveyed by Bloomberg. Revenue increased 7% to $21.9 billion, outpacing the 3% gain in noninterest expense.

16% of S&P 500 market-cap announced results

The Goldman analysts point out that so far only 16% of S&P 500 market cap has announced Q4 earnings. The analysts believe the Q4 earnings season is more spread out than other quarters.

However, for the week of January 21, 17% of equity cap – 70 companies – are set to report their earnings. As can be seen from the following table, 44% of the telecommunication services sector, 29% of industrials, and 27% of health care are set to report next week.

Results for week of January 21 2014

The Goldman Sachs Group Inc (NYSE:GS) analysts anticipate Q4 EPS of $28.56 for $108 of operating EPS in 2013. The analysts’ Q4 2013 estimate implies a 3% surprise relative to the current consensus estimate.

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