MarketWatch: Goldman downgrade reflects financials woes

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Goldman downgrade reflects financials woes

By Sam Mamudi, MarketWatch

NEW YORK (MarketWatch) -- The investment-banking crisis has spread to the most venerable of Wall Street names, with Goldman Sachs Group on the receiving end of a ratings downgrade and a string of estimate reductions.

Early Tuesday, Deutsche Bank analyst Mike Mayo lowered Goldman from buy to hold. His downgrade came as analysts at Oppenheimer & Co. and Ladenburg Thalmann -- which already rated the investment-banking giant as a sell -- cut their earnings estimates.

Last Wednesday, Merrill Lynch analyst Guy Moszkowski reduced his 2008 earnings estimate for Goldman as well.

Shares of Goldman lost 4% in morning action, changing hands at $170.84.

The moves highlight the bleak outlook for the financials sector.

Goldman has come through the credit crunch relatively unscathed, having reported just an 11% decline in second-quarter earnings of $2.1 billion.

In the process, the bank beat analyst estimates for the 12th quarter in a row. And unlike most of its leading rivals, Goldman isn't facing write-downs relating to auction-rate securities buybacks.
Goldman's downgrades and estimate cuts reflect market conditions, said analysts.

"Business has dried up," said Richard Bove, analyst at Ladenburg Thalmann. "Key drivers of revenue such as investment banking, and mergers and acquisition have simply not been happening enough to stimulate related business." ......(more)

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