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

S&P 500 4Q earnings results

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:

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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About the Author

Mani
Mani is a Senior Financial Consultant. He has worked in Senior Management role in large banking, financial and information technology organizations. He has provided solutions for major banking and securities firms across the globe in the area of retail, corporate and investment banking. He holds MBA (Finance) and Professional Management Accounting Qualifications. His hobbies are tracking global financial developments and watching sports

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