Bloomberg News

Goldman Sachs First-Quarter EPS Estimate Raised 22% at Sandler

March 13, 2012

Goldman Sachs Group Inc. (GS)’s first- quarter earnings-per-share estimate was raised 22 percent by analysts at Sandler O’Neill & Partners LP after a meeting they held with executives at the New York-based bank.

The analysts, led by Jeffery Harte, raised their estimate to $3.61 a share from $2.97, and boosted the full-year 2012 estimate to $13.34 from $12.82, according to a research note published today. The estimate for the full year in 2013 was also increased to $14.85 a share from $14.45.

Goldman Sachs, the fifth-biggest U.S. bank by assets, made about 60 percent of its 2011 revenue from sales and trading. David A. Viniar, 56, the company’s chief financial officer, told Harte’s team that markets are positioned for a rebound in so- called risk assets such as stocks and corporate debt.

“Mr. Viniar noted that high cash levels and a hunt for yield have already boosted risk asset prices and that recently resumed central bank easing sets the stage for what ‘could be a really big rally,’” according to the research note.

Harvey M. Schwartz, 48, and Pablo J. Salame, 46, two of the three co-heads of the global securities division that oversees sales and trading, said that the best opportunity in the near- term for Goldman Sachs to grow and win market share is in Europe, according to the note.

Banks in Europe, which are trying to raise capital to meet regulators’ requirements, aren’t able to lend as much money to companies, leading them to raise more in the capital markets, Schwartz and Salame said, according to the note. As European banks retreat from some types of business, Goldman Sachs expects to win market share, they said, according to the note.

Emerging Markets

“In the long term, management continues to view China and the emerging markets in general as GS’s largest growth opportunity,” Harte and his team wrote.

David M. Solomon, 50, Goldman Sachs’s co-head of investment banking, said that the company has strong order backlogs for equity and takeover assignments, according to the note. Mergers and acquisitions have been slowed by a wide discrepancy between what buyers are willing to pay and what sellers are asking, he added, according to Sandler O’Neill.

“CEO uncertainty remains high as many were surprised by how quickly the macroeconomic environment deteriorated last year,” the analysts wrote, citing Solomon. “Relatively cheap financing has bought some sellers time to avoid hitting lower bids and many potential buyers don’t yet feel the need to acquire.”

Goldman Sachs will earn $3.03 per share in the first quarter, according to the average estimate of 23 analysts surveyed by Bloomberg. The company earned $1.56 per share in the first quarter of 2011, or $4.38 per share when adjusted for a one-time preferred stock dividend.

To contact the reporter on this story: Christine Harper in New York at charper@bloomberg.net

To contact the editor responsible for this story: David Scheer at dscheer@bloomberg.net.


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