Tough market: Goldman beats estimate, but shares drop

Posted Dec 18th 2007 12:55PM by Joseph Lazzaro
Filed under: Earnings Reports, Goldman Sachs Group (GS)

Shares of Goldman Sachs fell $5.52 to $203.11 Tuesday morning, despite the fact the company posted Q4 EPS of $7.01, 33 cents better than the Reuters consensus estimate of $6.68.

During the quarter, Goldman Sachs (NYSE: GS) reported higher revenue from investment banking and stock trading and also recorded a gain from a power-plant sale, recording a $900 million before-tax gain for the sale of a wind farm.

Goldman also posted Q4 revenue of $10.74 billion versus the Reuters consensus estimate of $10.12 billion.

Not enough for Street

"It's a case where Goldman Sachs did not beat the earnings estimate by enough," analyst C. Leonard Bauer, formerly of Prudential, told BloggingStocks Tuesday. "In typical Goldman fashion, they've managed to do better in the investment banking space than their peers, but I don't think it will be enough to propel the stock higher, given the current macroeconomic environment."

Bauer added that he is bearish on the banking and financial service sectors, and would not be a buyer of Goldman's shares here. He doesn't own any positions in investment banks at this time.

During Q4, Goldman's equity trading revenue rose 22% to $2.6 billion; fixed income, currency, and commodities trading revenue rose 6% to $3.3 billion. Meanwhile, asset management revenue climbed 25% to $1.17 billion.

In general, analysts expect decelerating earnings results or losses from Wall Street's investment banks. Last week, Lehman Brothers (NYSE: LEH) reported a 12% decline in profits. Morgan Stanley (NYSE: MS) and Bear Stearns (NYSE: BSC) report later this week: Morgan Stanley is expected post a Q4 loss of -39 cents; Bear Stearns, a Q4 loss of -$1.80.

Tags: banking sector, earnings, Goldman Sachs, GS, inthenews, investment banks