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Why Goldman's Earnings Matter


All eyes on financial front runner.


Well, it was a struggle but Goliath won yesterday and now investors are hoping a different monster will seize the day. Goldman Sachs (GS) reports its results this morning, and while I don't want to be too melodramatic, Wall Street needs a savior.

In just the last few sessions the general consensus has gone from doom and gloom with Lehman Brothers (LEH) leading the sector down another notch to the sector dodging a bullet, the stocks in the space (including Lehman) being oversold and great values. Wall Street has gotten almost everything wrong so it's going to be great if it's finally guessed right.

Of course, there are a lot of (smart) folks that think it's too early for any hope or signs of a turnaround. That's what makes today's earnings report from Goldman so compelling: The fact is there isn't a lot of evidence or reasons to believe anything is much better, yet this is Goldman and we saw another Goliath gut it out on the golf course yesterday.

The issues for Goldman will include:

  • Size of write down
  • Deftness of its trading department, especially in commodities
  • Exposure to mortgage market
  • Decline in mergers and acquisition revenue
  • Level of assets

For everyone the biggest key will be company guidance and its opinion on which inning we're in with respect to the credit crisis.

As for the company, are there any more tricks up its sleeves? Is there anyway for the company to make money outside of trading? The company benefited early in the year because it was able to dodge bullets that felled its rivals but now the company has to go beyond benefiting from evading danger to showing it will still find a way to make money no matter the circumstances. Technically the stock sees some resistance at $184.00 then $192.00 then $208.00.

The Street is looking for $3.42 on revenue of $8.74 billion.

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No positions in stocks mentioned.
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