Meredith Whitney: Goldman Sachs and Morgan Stanley Need a Price Trimming
Financial stocks (NYSE:XLF) have been under fire recently. Several major banks, including Goldman Sachs (NYSE:GS) and Morgan Stanley (NYSE:MS) reached new 52-week lows last week. Now, more trouble is on the way for the two banking giants.
Analyst Meredith Whitney, who last year called for hundreds of billions of dollars in municipal bond defaults, is now cutting her third quarter estimates for both Morgan Stanley and Goldman Sachs. Whitney cut her Q3 estimate for Morgan Stanley from 53 cents to 28 cents per share. She also reduced the fiscal year 2012 forecast from $2.50 to $2.14. Barclays (NYSE:BCS) cut Morgan Stanley’s Q3 estimates last week from 43 cents to only 12 cents per share. Barclays also announced that Goldman may report a loss of 35 cents per share for the third quarter. Furthermore, Whitney slashed her Q3 estimates for Goldman Sachs from $3.39 to only 31 cents. She also cut the Goldman’s fiscal year 2012 forecast by nearly half, $15.30 down to $7.85.
Earlier in the day, KBW cut its price target on Goldman (NYSE:GS) from $185 to $155. The firm also cut its price target on Morgan Stanley (NYSE:MS) form $28 to $24. Goldman is s getting ready to increase its cost-cutting initiative even after $1.2 billion in cost cuts this past summer. It is probable that these cuts will cause even more job losses. Possibly somewhere around 1,000 jobs lost.
Bloomberg reports, “Goldman Sachs was the most profitable U.S. securities firm in Wall Street history before converting to a bank in September 2008 after the collapse of smaller rival Lehman Brothers Holdings Inc. The fourth quarter of 2008 was the only time since Goldman Sachs went public in 1999 that the firm has reported a quarterly loss.” In addition to Barclays, Bank of America (NYSE:BAC) is also expecting Goldman to report a loss.