Banking, finance, and taxes

Meredith Whitney Pans Goldman & Morgan (GS, MS)

Financial stocks were already looking mixed at best early this morning with the largest offering in capital markets history pricing last night for a trade today.  But Meredith Whitney, of her own Meredith Whitney Advisory Group, has lowered her earnings expectations  for both Goldman Sachs (NYSE: GS) and Morgan Stanley (NYSE: MS).  Whitney has a “Neutral” rating on both stocks.

Whitney had previously been credited for a solid trading buy in the name of Goldman Sachs, but she always maintained that she was negative on the sector for the reasons of credit coming out of the system and because of a lack of earnings growth in the stocks.  And she has been negative even on the solid names of late.  So while many will take this as a downgrade because estimates are cut, many might actually just take this as a reiteration of caution rather than a new development.

Goldman Sachs estimates were slashed to $6.00, but remain above the Thomson Reuters estimate of $5.59.  For fiscal-2010, Whitney cut estimates further down to $16.75 from over $21.00. Thomson Reuters is at $18.78 EPS. 2011 targets were taken down to $20.60 EPS from about $24.00; and she gave estimates as a base for 2012 of $21.45 EPS.

On Morgan Stanley, estimates were taken down similarly.  Whitney has lowered 2010 estimates to $2.60 EPS from $2.63, while Thomson Reuters has a figure of $3.32 EPS.  Her 2011 estimate was taken down to $2.75 EPS from $3.28; and 2012 estimates were initiated at $2.90 EPS.

On the news, Goldman Sachs is down almost 2% at $162.00 and Morgan Stanley is down 1.7% at $29.82 in pre-market trading.

JON C. OGG

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