Meredith Whitney called the first banking and financial implosion right. Then came the year-plus of a huge exponential rally where she stayed mostly very cautious in the sector for banks and large investment banking firms that masquerade as banks. That stance was not popular for most of the rally, but it matters again. And today Whitney slashed and burned earnings expectations for Goldman Sachs Group Inc. (NYSE: GS) and Morgan Stanley (NYSE: MS) days before the two due to report earnings.
NASDAQTrader shows the Q2 earnings estimates for Goldman Sachs cut down to $1.70 EPS, well under the $2.34 expected from Thomson Reuters; for the year that is now $15.70, down from $20 offered previously and under the Thomson Reuters consensus of $16.76. Morgan Stanley estimates were cut down to $0.40 EPS for the quarter and $0.50 is the current Thomson Reuters consensus.
After looking at the lowest estimates that Thomson Reuters has for this quarter soon to be reported, Whitney now has the lowest estimate or is tied for the lowest estimate on Goldman Sachs and her new estimates is only a penny above the lowest target on Morgan Stanley for the coming quarterly report.
Morgan Stanley shares are still up 0.5% at $24.06, at the lower-end of the 52-week range of $22.40 to $35.78.
Goldman Sachs shares are down 1.1% at $134.30, at the very low-end of the 52-week range of $129.50 to $193.60.
This looks like the further lowering of a low-set bar rather than a tell from the industry. These firms might not be in the greatest public spotlight, but the difference between this quarter report coming up and past quarters is that these brokerage firms might not have to have as unbelievable blow-out quarters as they would have before.
JON C. OGG