Goldman, Wall Street Firms Estimates Cut by Lehman (Update1) By David Clarke Aug. 30 (Bloomberg) -- Goldman Sachs Group Inc., Morgan Stanley, Merrill Lynch & Co. and Bear Stearns Cos., four of the five largest securities firms, will earn less than expected through next year after a rout in U.S. subprime mortgages, according to Lehman Brothers Holdings Inc. Lehman analyst Roger Freeman trimmed his share price estimates for Goldman to $214, for Morgan Stanley to $81, for Merrill to $106 and for Bear Stearns to $142, the company said in a note sent to clients today. He cut his third- and fourth- quarter and 2008 earnings estimates for the New York-based firms. ``Third-quarter earnings will be significantly impacted by the dislocation in the credit and asset-backed and mortgage markets,'' New York-based Freeman said in the note. He has an ``equal-rate'' rating on Goldman and Morgan Stanley, the two biggest U.S. securities firms by market value, and an ``overweight'' rating on Merrill and Bear Stearns. Wall Street firms have posted three straight years of record earnings, fueled by fixed-income trading. Defaults on U.S. housing loans to subprime borrowers, those with patchy credit histories, have reached a 10-year high, driving down the value of bonds backed by mortgages and prompting a global slide in stocks. The 12-member Amex Broker/Dealer Index fell 9.5 percent in the year through yesterday. Shares of Morgan Stanley were down 9.5 percent to $61.21 while those of Goldman declined 13 percent to $173.72. Merrill stock slipped 21 percent to $73.11 and Bear Stearns fell 34 percent to $107.10. Lehman dropped 30 percent. `Liquidity Crisis' Two Bear Stearns hedge funds collapsed in the past two months because of bad subprime-mortgage bets. Goldman, the world's second-largest hedge fund manager, was forced to put $2 billion of its own cash into one of its funds and waive some fees after it lost money. Standard & Poor's said yesterday business conditions for securities firms are worse than in the second half of 1998 and that revenue from investment banking and trading could fall 47 percent in the final six months of this year. ``We believe 1998 is a relevant comparison period because it was also characterized by a liquidity crisis in an otherwise pretty favorable economic and corporate earnings environment,'' Lehman's Freeman wrote today. Freeman halved his third-quarter estimate for Bear Stearns to $1.45 a share from $3.28. He cut his estimate for Goldman to $4.26 from $4.47, for Merrill to $1.74 from $1.90 and for Morgan Stanley to $1.43 from $1.80. Merrill is the third-biggest U.S. securities firm, followed by Lehman and Bear Stearns. To contact the reporter for this story: David Clarke in Edinburgh at dclarke3@bloomberg.net . Last Updated: August 30, 2007 06:34 EDT
HA, HA, HA !!! Uncle Freemann just took over the analysis from S&P yesterday and is selling it today as his genius estimate ! The day before MERRILL downgrading, then GS downgrading, and now LEHMAN ! Playing torch relay, what ?? !