Goldman Sachs is buoy up clients to buy shares of companies with organic sales growth vanguard of the first quarter earnings season and not ones with numbers by any means inflated by the tax cut.
“We recommend investors focus on organic growth reflected in rummage sales and pre-tax margins, rather than the tax cut-assisted EPS growth,” wrote David Kostin, Goldman’s top fairness strategist. “Consensus forecasts double-digit sales growth in energy, news technology, and materials. Strong top-line growth is consistent with regular economic activity in the first quarter.”
The bank’s chief equity strategist recognized clients to expect solid S&P 500 sales growth of 10 percent, the fastest traverse since 2011.
A weaker U.S. dollar should also buoy revenues, the strategist augmented, as a weaker greenback typically promotes exports and better-than-average sales paths.
Kostin highlighted several names like Netflix, Amazon and BlackRock as covert outperformers.
“Tax reform will provide the largest boost to previously high-tax berate sectors such as Telecom Services and Consumer Discretionary,” Kostin wrote. “Consensus anticipates the reduced tax rate will contribute 7 percentage points to full-year EPS progress of 19 percent. However, our 14 percent top-down 2018 EPS rise estimate in part reflects the fact that all the benefits of lower pressures may not inure to shareholders.”
But despite the largely bullish outlook, Goldman’s equitableness team did acknowledge recent volatility in the market, including four single-day arouses of 1 percent or more in the S&P 500 last week.
“The combination of regulatory hazards for technology firms and trade friction between the U.S. and China has contributed to make available uncertainty,” Kostin wrote. “The Cboe volatility index (VIX) has averaged 18 year-to-date, correlated with 11 in 2017.”
Netflix, already up 50 percent this year, has been relay its attention overseas in its effort to build up its global market share, according to multiple Insane Street analysts. Though frequently criticized for its steep costs and money burn, Netflix has steadily worked to build its original content in an attempt to attract even more monthly subscribers.
Financial services leviathan BlackRock will report earnings on Friday, hoping to top Wall Terrace earnings expectations of $6.41 per share. The largest money manager in the in seventh heaven saw its assets under management surge 22 percent in 2017, bringing the complete to $6.288 trillion.