Shares of the Goldman Sachs Group, Inc. (NYSE: GS) were down 1.2 percent in pre-market trading after the company reported earnings per share of $2.90. Consensus Wall Street analyst estimates were for Goldman Sachs EPS of $2.91, and these results miss by a penny. The mild reaction from the market would seem to reflect this, though the investment bank missed on revenues as well.
Shares of Citigroup Inc. (NYSE: C) traded up sharply after the bank reported its third quarter financial results. Analysts had been expecting earnings of $1.28 going into this morning’s announcement. The bank reported EPS of $1.31, handily beating estimates. Shares rallied 3.5 percent in the pre-market immediately following the news.
Shares for Citigroup had been down 6.27 percent year to date, compared with a drop of 5.04 percent for the Dow Jones Industrial Average (^DJI) and a decline of 7.39 percent for shares of Goldman Sachs.
The $2.91 EPS number from Goldman Sachs represents year over year growth of -35.5 percent. Just 90 days ago, Wall Street consensus analysts for GS EPS was $4.37. The 33 percent, $1.46 EPS estimate reduction would seem to be at least partially accounted for in the year-to-date decline in GS share prices of 7.39 percent.
Estimates for GS EPS growth for the fourth quarter are 14.4 percent, and -5.3 percent for the full 2015-year. Goldman Sachs EPS growth is seen accelerating in 2016 to 19.7 percent and then growing by 7.5 percent annually over the coming five years.
The $1.31 number from Citigroup equates to year over year growth of 48.9 percent. For the fourth quarter of 2015, Citigroup EPS growth is seen by Wall Street analysts at 1,933.3 percent and at 152.7 percent for the full 2015-year. Citigroup EPS growth is then expected to come in at 5.4 percent next year and to average 31.4 percent annually over the next five years.
Goldman Sachs reported revenues of $6.86 billion; analysts had been looking for $7.12 billion. The figure represents year over year sales growth of -18.2 percent. Going into today’s announcement, fourth quarter Goldman Sachs sales were forecast at $7.99 billion and full year sales at $34.94 billion. Analysts see 2016 revenues at $35.68 billion, which, if met, would be a continuation of the 2 percent yearly growth the company has been attempting to achieve. Today’s announced revenue shortfall will not make this task any easier for Goldman Sachs management.
Citigroup third quarter 2015 revenues were $18.70 billion. The Wall Street consensus estimate was for Citigroup sales of $18.54 billion. As with their EPS numbers, Citigroup was able to soundly beat Wall Street’s sales targets. Going into today’s announcement, analysts were calling for fourth quarter 2015 Citigroup revenues of $18.57 billion and full year revenues of $76.22 billion. Sales are expected to grow 1.8 percent to $77.60 billion in 2016.
Going into today’s announcement, Citi carried $672 billion in cash and held $479.3 billion in debt. Citi had a debt to equity ratio of 116 percent compared with a banking industry average of 115 percent, according to Morningtar. Citi used its highly levered position effectively, generating a profit margin of 18.36 percent and an operating margin of 28.59 percent. Citi holds $232.27 in cash for each outstanding share.
By comparison, going into this morning’s announcement, Goldman Sachs held $701.24 billion in cash and $388.41 billion in debt. Goldman Sachs’ debt to equity ratio is reported by Morningstar to be 315 percent compared to the investment banking industry average of 202 percent. Like Citigroup, at least Goldman Sachs is able to use their highly levered position to generate a healthy profit margin of 23.21 percent and a remarkable operating margin of 40.24 percent.
Goldman Sachs stock pays an annual dividend of $2.60 which equates to a current yield of 1.45 percent. Citigroup stock pays an annual dividend of $0.20 or 0.39 percent.
Goldman Sachs has seen its 2016 EPS estimates cut by 2.3 percent from $19.83 to $19.36 over the past 90 days. 2016 Estimates for Citigroup have also been taken down, though less than Goldman’s, by 1.7 percent or $0.10, from $5.96 to $5.86 over the same period.
[Feature Photo by Andrew Burton / Getty Images]