GS & MS’s Q4 2008 earning estimates

According to Merrill Lynch analyst Guy Moszkowski, Goldman Sachs Group Inc (GS) will likely post a fourth-quarter loss, its first ever as a public company, due to the "stressed" equity environment over the past two months, which will also weigh on Morgan Stanley's (MS) quarterly results.

However Morgan Stanley should be in a relatively better position than Goldman because of its business mix -- limited private equity and very little proprietary equity trading at this point.

GS remains in many ways at the forefront of the capital markets industry, but if it can't consistently produce a premium return on equity (ROE), it's not going to be able to continue to have the premium valuation multiple that it has enjoyed.
The analyst now expects Goldman to post a fourth-quarter loss of 49 cents per share, compared with his prior profit view of $2.98 per share. He also lowered his price target on the stock to $100 from $159 to reflect the fourth-quarter loss estimate and uncertainty on 2009 ROE.

Moszkowski said, “With this 4Q loss, GS would have underperformed MS for 2 straight quarters in terms of ROE, and our forecast for2009 is for ROE of around 10 percent”.
He cut Morgan Stanley's fourth-quarter earnings estimate to 36 cents a share from 72 cents, mainly reflecting the expectation of another significant leveraged finance mark of $1.4 billion as spreads widened significantly in the quarter.

Moszkowski continues to rate Goldman a "neutral," and Morgan Stanley a "buy".


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Sources :

Reuters: Goldman Sachs may post loss: analyst, November 3, 2008 10:23am EST

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