The market expects Goldman Sachs (GS) to deliver a year-over-year decline in earnings on lower revenues when it reports results for the quarter ended June 2020. This widely-known consensus outlook is important in assessing the company’s earnings picture, but a powerful factor that might influence its near-term stock price is how the actual results compare to these estimates.
The earnings report, which is expected to be released on July 15, 2020, might help the stock move higher if these key numbers are better than expectations. On the other hand, if they miss, the stock may move lower.
While management’s discussion of business conditions on the earnings call will mostly determine the sustainability of the immediate price change and future earnings expectations, it’s worth having a handicapping insight into the odds of a positive EPS surprise.
Zacks Consensus Estimate:
This investment bank is expected to post quarterly earnings of $3.84 per share in its upcoming report, which represents a year-over-year change of -33.9%.
Revenues are expected to be $9.33 billion, down 1.4% from the year-ago quarter.
Estimate Revisions Trend:
The consensus EPS estimate for the quarter has been revised 15.41% higher over the last 30 days to the current level. This is essentially a reflection of how the covering analysts have collectively reassessed their initial estimates over this period.
Investors should keep in mind that the direction of estimate revisions by each of the covering analysts may not always get reflected in the aggregate change.
How Have the Numbers Shaped Up for Goldman?
For Goldman, the Most Accurate Estimate is higher than the Zacks Consensus Estimate, suggesting that analysts have recently become bullish on the company’s earnings prospects. This has resulted in an Earnings ESP of +17.69%.
On the other hand, the stock currently carries a Zacks Rank of #3.
So, this combination indicates that Goldman will most likely beat the consensus EPS estimate.
Does Earnings Surprise History Hold Any Clue?
While calculating estimates for a company’s future earnings, analysts often consider to what extent it has been able to match past consensus estimates. So, it’s worth taking a look at the surprise history for gauging its influence on the upcoming number.
For the last reported quarter, it was expected that Goldman would post earnings of $2.83 per share when it produced earnings of $3.11, delivering a surprise of +9.89%.
Over the last four quarters, the company has beaten consensus EPS estimates two times.
Bottom Line:
An earnings beat or miss may not be the sole basis for a stock moving higher or lower. Many stocks end up losing ground despite an earnings beat due to other factors that disappoint investors. Similarly, unforeseen catalysts help many stocks gain despite an earnings miss.
That said, betting on stocks that are expected to beat earnings expectations does increase the odds of success. This is why it’s worth checking a company’s Earnings ESP and Zacks Rank ahead of its quarterly release. Make sure to utilize our Earnings ESP Filter to uncover the best stocks to buy or sell before they’ve reported.
Goldman appears a compelling earnings-beat candidate. However, investors should pay attention to other factors too for betting on this stock or staying away from it ahead of its earnings release.
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