Tuesday, April 18, 2017
Q1 earnings season is heating up this morning, with notable S&P 500 companies releasing quarterly results before the bell today, including some of the biggest banks on Wall Street. Of these — which include reports from Bank of America BAC and Charles Schwab SCHW — Goldman Sachs GS has made the biggest splash so far this morning, though not for a good reason.
Goldman Sachs posted its first earnings miss in many quarters, putting up $5.15 per share on quarterly revenues of $8.026 billion. These are both well below the Zacks consensus estimates of $5.38 per share and $8.37 billion in sales, respectively. This 3.5% earnings miss flies in the face of the trailing 4-quarter average earnings beat of 15.25% per quarter. Goldman did raise its dividend yield from 65 cents to 75 cents per share, and the stock is down 2.7% in the pre-market, -8% year to date.
Revenues from bond trading hit a Q1 shortfall for Goldman Sachs in the quarter, typically a strong business for the investment banking major. Q1 equities fell 6% to $1.67 billion. Yet rising net interest rate margins as the Federal Reserve strengthens U.S. monetary policy should eventually bear fruit for all finance companies, especially those on Goldman’s level, so near-term worries about its stock are likely going to be just that — near-term. That said, Goldman’s shares are helping the Dow Jones Industrial Average trade in the red this morning.
Bank of America, on the other hand, posted 41 cents per share, 6 cents higher than the Zacks consensus estimate, on $22.2 billion in revenues, surpassing the $21.54 billion expected. Net interest income rose 5% to $11.1 billion in the quarter. This represents the fourth-straight beat for BofA on earnings, which is a Zacks Rank #2 (Buy) stock.
Charles Schwab also topped estimates, beating on the bottom line by 2 cents to 39 cents per share, on $2.08 billion in revenues, which also amount to a slight beat. Outside the finance industry, Johnson & Johnson JNJ posted a Q1 miss on both top and bottom lines before the bell this morning and trading down 1.7% in the pre-market. UnitedHealth Group UNH, however, beat bottom-line estimates by 19 cents to $2.37 per share on revenues that also topped expectations, sending UNH shares up 2.2% so far this morning.
A New Snap for Great Britain?
British Prime Minister Theresa May surprised markets this morning with strong words for the Labor party, which opposes her objectives in Parliament. The recently elected May has now called for a snap election June 8 — interestingly, it was a snap vote last summer which brought forth the Brexit decision in the first place. “You’ve challenged our objectives, threatened to block legislation…” May said, directing her words to opposing forces in British government. “Here is your chance to show you are not opposing government for the sake of it… [don’t] treat politics as a game.”
It’s a risky move considering ex-PM David Cameron was quite certain voters in Great Britain would vote against the Brexit initiative last year. Yet her firm words are having a positive impact on the British pound following her speech at 10 Downing Street. Also consider this snap vote, if it’s decided on, would come close on the heels of a general election in France, where one of its main candidates, Marine Le Pen, threatens to further weaken the European Union if she is elected. Long story short: plenty is now at stake in Europe.
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