Looking Past Q2 Beat, Goldman Sachs Topline Outlook Still Troublesome

Despite posting strong second-quarter earnings, shares of Goldman Sachs Group Inc (NYSE: GS) took a plunge, closing down almost 6 percent on Tuesday.

The reason was poor trading results, which were down 40 percent for the quarter. In response to the report, Keefe Bruyette & Woods analyst Brian Kleinhanzl downgraded the stock from Outperform to Market-Perform and lowered its price target from $260 to $230.

“We do not expect… a materially better revenue outlook to emerge [near-term],” said Kleinhanzl.

The analyst expects trading headwinds to continue through the year, noting that he's unsure of the company’s health.

Kleinhanzl is also concerned his current revenue estimates are too high. Without solid revenue growth, the stock will have no base to grow on in the long term.

“[Goldman Sachs] has become a show-me stock, and would need to consistently outperform in FICC trading for more than one quarter in order for us to become more constructive at this point in time,” said Kleinhanzl.

The analyst cut his EPS estimates for the company through 2019 by an average of 3.5 percent.

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