RESEARCH ALERT-UPDATE 1-JP Morgan cuts outlook on Goldman Sachs
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Aug 15 (Reuters) - J.P. Morgan Securities lowered its earnings estimates on Goldman Sachs Group Inc (GS.N) to reflect a seasonally slow quarter and continued weakness in the credit environment.
"We believe the weakness in the third quarter of 2008 is due to the slowdown in execution and origination, not due to a major write-down in credit," analyst Kenneth Worthington said in a note to clients.
Worthington, who maintained his "overweight" rating on the stock, cut his third-quarter earnings outlook to $2.40 from $4.00 a share, and fourth-quarter outlook to $4.47 from $5 a share.
He also lowered his 2009 estimate by a dollar to $18.50.
Equity capital market revenue in the third quarter of the year has been a disappointment for Goldman, and the debt capital market was weak as well, Worthington said. He expects $500 million in losses in private equity.
The analyst sees Goldman experiencing somewhat higher write-downs this quarter at about $1.5 to $2 billion (gross) given the deterioration in residential and commercial related indices, but expects the write-down to be manageable.
"A dominant position in high-margin, high-barrier businesses and a more manageable presence in credit should continue to enable Goldman to out-earn and outperform peers," Worthington added. (Reporting by Eric Yep in Bangalore; Editing by Jarshad Kakkrakandy)
