Q3 EPS Views See a Goldman Sachs Beat and Morgan Stanley Miss

October 15th, 2012 by

Sell side analyst earnings estimate changes are sometimes volatile, as can be seen by Q3 2012 estimates for Morgan Stanley (MS.N), currently expected to report latest quarterly earnings of $0.24/share (gold line), according to Thomson Reuters I/B/E/S.  But Thomson Reuters StarMine’s earnings SmartEstimate, which weights analysts according to accuracy and timeliness, is looking for $0.22/share (blue line), which is 5.1% below the mean, and implies an EPS miss for Morgan Stanley.


Morgan Stanley Q3 EPS forecast history

While the earnings SmartEstimate had remained just under the mean value most of August and September, October’s behavior first showed a potential positive divergence, and then turned negative most recently.  This could be indicative of both uncertainty and less conviction than investors would prefer to observe, but also driven by lower revenue forecasts.  While Morgan Stanley’s mean revenue estimate on the quarter currently lies at $6.362 billion, the revenue SmartEstimate figure is 3.7% lower at $6.125 billion.


In contrast to the Morgan Stanley forecasts, earnings and revenue estimates for Goldman Sachs (GS.N) have been heading higher since September (see chart below).  For Goldman’s Q3 earnings forecast, the mean estimate currently stands at $2.12 (gold line) and the SmartEstimate at $2.20 (blue line), which is 3.9% above the mean.  Both forecasts were in the $2.00 range heading into September.


Goldman Sachs Q3 EPS forecast history

Two StarMine-rated five-star analysts are betting Goldman will do even better, with estimates of $2.70 and $2.75.  Goldman’s Q3 revenue estimates have moved higher since September as well, with the current mean value at $7.301 billion, and the revenue SmartEstimate 1% higher at $7.372.


Historically when the SmartEstimate varies from the mean by over 2% in either direction, earnings surprises have gone in the direction of the SmartEstimate divergence over 70% of the time.  So the odds are favoring a Goldman Sachs EPS beat and a Morgan Stanley EPS miss.