Investing

Earnings Previews: Goldman Sachs, Truist

Four of the country’s largest financial institutions reported fourth-quarter earnings before markets opened on Friday. The impact of those reports varied, but the general expectation that the results would be extraordinary did not materialize.

JPMorgan beat earnings per share (EPS) estimates by more than 10% but missed revenue estimates by $552 million. The bank’s operating leverage was negative with expenses up 7%, while revenue rose by just 1% for the full fiscal year. The stock traded down about 3% in Friday’s premarket. Citigroup missed the consensus quarterly EPS estimate of $1.66 by 12% but managed to beat the $16.76 billion revenue estimate by 1.4%. The stock traded down nearly 4% before the bell.

Wells Fargo shared traded up by more than 2%. Full-year revenue rose by 12.8%, while expenses dropped by about 5.7%. Fourth-quarter EPS of $1.38 was 38% above the consensus estimate and more than double the year-ago quarter’s $0.64. Shares traded higher early but dropped to a loss of around 1% in the premarket. BlackRock grew its assets under management to more than $10 trillion, a year-over-year increase of 15%. Quarterly revenue came in less than 1% below estimates, and EPS were about 2.8% higher than consensus estimates. BlackRock shares traded down about 1.5% before Friday’s opening bell.

U.S. equity markets are closed Monday in observance of the birth and life of Dr. Martin Luther King Jr.

Before markets open on Tuesday, two more large financial firms are set to report fourth-quarter and full-year results.

Goldman Sachs

The smallest of the nation’s six biggest diversified banks, Goldman Sachs Group Inc. (NYSE: GS) has posted a 12-month share price gain of about 32%. Since peaking in early November, however, the shares have retreated 7.3%. Over the past two years, Goldman Sachs has exceeded sales estimates in all eight quarters and EPS estimates in six of those quarters. The exceptions were the first and second quarters of 2020.

Of the 27 analysts covering the stock, 16 have given it a rating of Buy or Strong Buy and the rest have a Hold rating. At a recent price of around $390.80 a share, the upside potential based on a median price target of $457.50 is 16.9%. At the high price target of $609, the implied upside is 55.8%.

Fourth-quarter revenue is forecast to come in at $11.92 billion, which would be a decline of about 11% sequentially and an increase of 3% year over year. Adjusted EPS are forecast at $11.92, down 20% sequentially and 5% lower year over year. The current estimates for fiscal 2021 call for revenue of $58.64 billion, up 31.6%, and EPS of $59.42, up nearly 78%.

The stock trades at 6.6 times expected 2021 EPS, 9.8 times estimated 2022 earnings of $39.97 and 9.4 times estimated 2023 earnings of $41.68. The stock’s 52-week range is $270.62 to $426.16. Goldman Sachs pays an annual dividend of $8.00 (yield of 1.98%). Total shareholder return for the past 12 months was 29.2%.

Truist

Truist Financial Corp. (NYSE: TFC), known as BB&T before its 2019 merger with SunTrust, is the country’s third-largest regional bank, with a market cap of more than $89 billion. Over the past 12 months, the stock’s value has gained almost 32%. The stock posted a new all-time high on Thursday but was trading down in Friday’s premarket, likely due to the less-than-thrilling results seen in the morning.

Sentiment on the stock is mixed, with 11 of 24 analysts giving the shares a Buy or Strong Buy rating and 11 rating the shares at Hold. At a share price of around $66.40, the upside potential based on a median price target of $69.50 is 4.7%. At the high price target of $76, the upside potential is about 14.5%.

Analysts expect fourth-quarter revenue of $5.6 billion, down 0.5% sequentially and about 1.4% year over year. Adjusted EPS are forecast at $1.25, down 12% sequentially but up by nearly 6% year over year. For the full 2021 fiscal year, current estimates call for EPS of $5.39, up 42%, and revenue of $22.3 billion, down about 2%.

Truist stock trades at 12.4 times expected 2021 EPS, 13.8 times estimated 2022 earnings of $4.83 and 12.2 times estimated 2023 earnings of $5.49. The stock’s 52-week range is $47.69 to $67.47, and the bank pays an annual dividend of $1.92 (yield of 2.88%). Total shareholder return for the past 12 months was 29.7%.