Goldman Sachs (GS) Earnings Expected to Grow: What to Know Ahead of Next Week's Release
Goldman Sachs (GS) is expected to see a year-over-year earnings increase on higher sales when it releases results for the quarter ended March 2021. This well-known consensus outlook gives a fair idea of the company's earnings picture, but how actual results compared to these estimates is a powerful factor that could affect short-term stock price.
The earnings report, slated to be released April 14, 2021, could help the stock climb higher if these metrics are better than expected. On the flip side, the stock can move down if it misses.
While the sustainability of the immediate price change and future profit expectations depend mainly on management's discussion of the terms and conditions as part of the results call, it is worth compromising the likelihood of a positive EPS surprise.
Zack's consensus estimate
This investment bank is expected to report quarterly earnings of $ 9.14 per share in its upcoming report, a year-over-year change of + 193.9%.
Revenue is expected to be $ 11.2 billion, up 28.1% from the year-ago quarter.
Estimation of the revision trend
The consensus-based EPS estimate for the quarter has been raised 6.02% over the past 30 days to current levels. This essentially reflects how the covering analysts collectively reevaluated their original estimates over this period.
Investors should be aware that an aggregate change may not always reflect the direction of the estimated changes by each of the covering analysts.
Price, consensus and EPS surprise
Estimates of the revisions made prior to the release of a company's earnings figures provide an indication of the terms and conditions for the period for which the results are released. This insight forms the core of our proprietary surprise prediction model - the Zacks Earnings ESP (Expected Surprise Prediction).
The Zacks Earnings ESP compares the most accurate estimate to the Zacks Consensus estimate for the quarter. The most accurate estimate is a newer version of the EPS estimate from Zacks Consensus. The idea is that analysts who revise their estimates just before earnings are released will have the latest information that could potentially be more accurate than they and others who contributed to the consensus had previously predicted.
A positive or negative ESP value for the result theoretically indicates the likely deviation of actual income from the consensus estimate. However, the predictive power of the model is only important for positive ESP values.
A positive profit ESP is a strong predictor of a profit strike, especially in combination with a Zacks rank of 1 (strong buy), 2 (buy) or 3 (hold). Our research shows that stocks with this combination produce a positive surprise nearly 70% of the time, and a solid Zacks rank actually increases the predictive power of Earnings ESP.
Please note that a negative ESP value for the result does not indicate a loss of profit. Our research shows that it is difficult to predict a profit hit with any degree of confidence for stocks with negative ESP earnings values and / or Zacks rank 4 (sell) or 5 (strong sell).
How have the numbers developed for Goldman?
For Goldman, the most accurate estimate is higher than the Zacks consensus estimate, suggesting that analysts have been optimistic about the company's earnings outlook lately. This has led to an ESP result of + 6.86%.
On the flip side, the stock currently ranks # 1 in Zacks.
So this combination shows that Goldman is most likely to beat the EPS consensus estimate.
Does the result surprise history have a hint?
When calculating estimates of a company's future earnings, analysts often consider the extent to which it has been able to match previous consensus estimates. So it's worth taking a look at the surprise story to gauge its impact on the number ahead.
For the most recently reported quarter, Goldman was expected to make $ 6.99 per share when it actually made a profit of $ 12.08, which is a surprise of + 72.82%.
In the past four quarters, the company has exceeded EPS consensus estimates four times.
Hit or loss in profit may not be the only basis for a stock to move up or down. Many stocks are losing ground despite falling earnings due to other factors that disappoint investors. Similarly, unforeseen catalysts help a number of stocks win despite a loss of earnings.
However, betting on stocks that are expected to beat earnings expectations increases the chances of success. For this reason, it's worth checking a company's ESP and Zacks Rank before its quarterly release. Make sure to use our ESP Profit Filter to find the best stocks to buy or sell before they are reported.
Goldman appears to be a compelling winner. However, investors should also consider other factors to bet on this stock or to stay away from it before posting their profits.
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