Yesterday, The Goldman Sachs Group Inc. (GS) announced the sale of its 15-year senior unsecured notes with a maturity value of $10 million. These notes have their maturity date on September 1, 2026 and Goldman will start the settlement from September 1, 2011. The coupon rate is 6.05% for the notes.
Last month, Goldman sold 15-year senior unsecured notes with a maturity value of $10 million. These notes have their maturity date on August 10, 2026 and its coupon rate is 5.8%.
Last week, Goldman announced the redemption of floating coupon notes with a maturity value of $32 million. These notes, having their maturity date on July 18, 2012, command a redemption price of 68.53% of the remaining amount.
Earlier this week, Goldman’s closest competitor Morgan Stanley (MS) also announced the sale of floating rate notes (FRN), valued at 1 billion yen, and maturing in August 2016. The company will start the settlement from August 23, 2011.
Earnings Recap
In July, Goldman reported second-quarter 2011 earnings per share of $1.85, substantially lower than the Zacks Consensus Estimate of $2.29 per share. Coupled with the global macro-economic concerns, the fall was driven by a decrease in revenue and poor performance in Institutional Client Services division. However, lower operating expenses partially offset the decline.
Total revenue of Goldman plummeted 39% from the prior quarter and 18% year over year to $7.3 billion. Revenue reported also missed the Zacks Consensus Estimate of $9.1 billion, primarily due to a decline in client activity level.
Estimate Revision Trends
Over the last 30 days, 1 out of the 15 analysts covering Goldman has lowered the estimate for the third quarter, while none moved north. Furthermore, for fiscal 2011, none out of the 19 analysts have decreased their estimates, while 1 analyst has increased the estimate over the last 30 days.
Currently, the Zacks Consensus Estimate for the third quarter is operating earnings of $2.74 per share, a drop of 8.1% from the year-ago quarter. Moreover, over the last 7 days, earnings estimates for the third quarter and fiscal 2011 have remained stable.
Our Take
The redemption of notes will provide the company some financial flexibility at this point. We anticipate that these restructuring initiatives to reduce balance sheet risk will boost its valuation over time. Nevertheless, Goldman is facing major challenges with respect to competition and is gradually regaining its industry-leading position.
Goldman currently retains a Zacks #3 Rank, which translates into a short-term Hold rating. However, considering the fundamentals, we are maintaining a long-term Underperform recommendation on the stock.
GOLDMAN SACHS (GS): Free Stock Analysis Report
MORGAN STANLEY (MS): Free Stock Analysis Report
Get all Zacks Research Reports and be alerted to fast-breaking buy and sell opportunities every trading day.
Be the first to comment