Goldman Sachs (GS) and Bank of America (BAC) are scheduled to announce quarterly results on October 17, while Morgan Stanley (MS) is expected to report earnings on October 18. What to watch for:


GOLDMAN COULD OUTPERFORM: In a research note ahead of quarterly results, BofA says that its investor conversations suggest a long bias on JPMorgan (JPM) among both institutional and long/short investors. Goldman Sachs also anecdotally favored, over Morgan Stanley, given 1.1-times P/TBV, well-telegraphed expectations for weak EPS and potential for improving EPS/ROTCE outlooks. The firm reduced Goldman Sachs' Q3 EPS to $4.97 vs. $6.36 consensus, driven by markdowns on CRE exposure. While regulatory uncertainty to remain an overhang, stock reflecting this at 1.1-times P/TBV. Shares could outperform on investment banking rebound, fading drag from consumer and realization of management's efficiency/capital optimization initiatives.

Bofa also reduced Morgan Stanley's Q3 EPS to $1.28 vs. $1.36 consensus. Investors laser-focused on ROTCE defensibility given rising regulatory burden and headwinds from a higher for longer rate backdrop. CEO transition also a factor as investors evaluate potential risk following CEO James Gorman's retirement, the firm adds. Premium valuation and the resiliency of the business model will be put to test over the coming quarters.


MOVING TO THE SIDELINES: On Tuesday, UBS downgraded Morgan Stanley to Neutral from Buy with a price target of $84, down from $110. The firm stated that despite the company's successful transformation into a wealth management-focused firm with a solid and peer-leading growth profile, Morgan Stanley is confronted with obstacles that include "deposit sorting / yield seeking," competition for talent, and a challenging revenue environment. Morgan Stanley has executed its transition well, but the stock seems to be "fairly priced" at this point, the firm tells investors in a research note.


TARGET CUT: JMP Securities lowered the firm's price target on Goldman Sachs to $440 from $450, while keeping an Outperform rating on the shares. After some "ups" then "downs" in Q3, sentiment is exiting at a similar place to where it started, the firm tells investors in a research note. Even though Q3 results will not be great at surface level and new information must continue to be assessed, much of the bad news is understood, JMP argues.

Meanwhile, Jefferies lowered the firm's price target on Bank of America to $28 from $31, keeping a Hold rating on the shares as it introduced 2025 EPS estimates for its U.S. banks coverage and updated it Fed rate forecasts to reflect two cuts in 2024 and four rate cuts in 2025. Jefferies is looking for net interest income to stabilize in 2024, but there are "tons of factors" to determine how and when.

Evercore ISI also cut the firm's price target on Bank of America to $33 from $35, but maintained an Outperform rating on the shares. Ahead of Q3 reporting season for the brokers, banks and asset managers, the firm lowered Q3 estimates by 6% on average, stating that the backdrop remains challenging for the brokers, universals and trust banks as markets were down in the quarter, rates were higher, spreads wider and investment banking continues to "work through a slow recovery." Evercore ISI also lowered the firm's price target on Morgan Stanley to $102 from $104, while keeping an Outperform rating on the shares. 

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