Goldman Sachs Group Inc 4Q17 Earnings Preview

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Goldman Sachs Group Inc 4Q17 Earnings Preview
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Goldman Sachs Group Inc (NYSE:GS) is scheduled to release its fourth-quarter earnings report on Wednesday before opening bell. Consensus estimates for Goldman Sachs 4Q17 earnings vary widely, with some estimates at $4.59 per share on $7.6 billion in revenue. Deutsche Bank gives a consensus of $5 per share along with its own estimate of $4.97 per share, and estimates in other places vary.

In the same quarter a year previously, the investment bank reported earnings of $5.08 per share on $8.17 billion in revenue.

Goldman Sachs 4q17 earnings

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Tax reform hits Goldman Sachs 4Q17 earnings

Tax reform is the big story in fourth-quarter earnings reports across the board, and most banks are taking massive charges against their fourth-quarter results in exchange for benefits to be delivered in 2018. Goldman Sachs management already said that they expected to take a $5 billion charge, two-thirds of which will be for cash repatriation and the other one-third for DTA re-measurement.

One question some analysts have is whether Goldman will be able to increase its share repurchases and if so, by how much. JPMorgan analysts estimate Goldman’s share buybacks at $1.5 billion for the fourth quarter.

Goldman Sachs 4Q17 earnings preview: mixed investment banking results

Deutsche Bank analyst Matt O-Connor said in a recent note that he believes fixed income, currency and commodities revenue was “sluggish” during the fourth quarter. However, he added that the comparisons get a lot easier for the firm starting in the first quarter. KBW analysts are looking for a deep decline across the board for investment banks, possibly as much as 24% year over year and 15% quarter over quarter. Stock trading revenues are expected to be a brighter area.

O-Connor noted that other businesses have been performing well, so he expects the investment banking pipeline to become stronger. He also expects positive updates on the $5 billion growth efforts on the Goldman Sachs 4Q17 earnings call.

Volatility continued to weigh on trading revenues during the fourth quarter, and investment banks are up against difficult year-over-year comparisons. Trading was running at a fever pitch in the fourth quarter of 2016 in the wake of the upset in the presidential election. Barclays analysts said in a recent note that they expect investment banking fees to rise by 5% to 10% year over year but fall slightly quarter over quarter.

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