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Goldman Sachs (GS) and Bank of America (BAC) are scheduled to announce quarterly results on Tuesday, April 18, while Morgan Stanley (MS) is expected to report earnings on Wednesday, April 19. Here is what to watch for ahead of earnings.

Outlook, Not Results 

In a pre-earnings research note, Morgan Stanley argued that April earnings will be about “outlook, not the results.” The firm lowered 2023/2024 EPS to a median of 4%/15%, respectively, to reflect accelerating deposit betas driving down net interest margins, tightening lending standards slowing loan growth and boosting NCOs, and slowing buybacks.

Morgan Stanley lowered its price targets on JPMorgan (JPM) to $153 from $173, Wells Fargo (WFC) to $47 from $58, Goldman Sachs to $329 from $332, and Bank of America to $31 from $37. The firm has Overweight ratings on JPMorgan and Wells Fargo, Equal Weight ratings on Bank of America and Goldman Sachs, and an Underweight rating on Citigroup (C).

De-Risked Outlook 

Last Tuesday, UBS upgraded Goldman Sachs to Buy from Neutral, saying the shares are attractively priced as the company's outlook is "de-risked." The firm says Goldman is well positioned to outperform amid the elevated levels of market volatility.

It believes the bank has the opportunity to accelerate the growth of its wealth management platform and transactional banking business through "attractively priced M&A." In addition, the stock is trading well below its valuation average over the last two years, contends UBS.

Earnings Profile More Favorable

Barclays lowered the firm's price target on Goldman Sachs to $437 from $495, but kept an Overweight rating on the shares ahead of the Q1 results. Goldman's wealth management should benefit from higher market valuations, while a lack of monetization activity pressures asset management, Barclays tells investors in a research note.

JMP Securities also lowered the firm's price target on Goldman Sachs to $460 from $470, maintaining an Outperform rating on the shares.

The firm continues to like the risk-reward ratio in Goldman Sachs, as the bank has successfully navigated numerous periods of market stress in its history, and the firm believes its near-term earnings profile is more favorable than most peers given that it is less interest rate dependent. JMP Securities expects trading revenue should be more resilient in a volatile environment.

Litany of Concerns Impacting the Sector

Barclays also lowered the firm's price target on Bank of America to $39 from $48, keeping an Overweight rating on the shares ahead of the Q1 results. While deposit inflows could benefit near-term results, Bank of America's increasing betas "could weigh looking out," the firm says.

Keeping an Overweight rating on the shares, JPMorgan lowered the firm's price target on Bank of America to $34 from $38. The firm says a "litany of concerns" is impacting the banking sector, including the outlook for a recession, the impact of sustained high inflation, some slowdown in consumer spending, and the impact of likely increased regulatory requirements and oversight.

In the near-term, loan growth is likely to slow, deposits should hold up well on period-end basis due to inflows from smaller banks; and net interest margins have peaked with net interest income likely to come down, the firm tells investors in a research note. JPMorgan expects bank stocks to "remain choppy and pressured" due to these concerns.

Modest Decline in Revenues

Barclays lowered the firm's price target on Morgan Stanley to $112 from $125, but kept an Overweight rating on the shares ahead of the Q1 results. The firm expects a modest year-over-year decline in revenues due to tough compares in trading and continued investment banking weakness while wealth management and investment management "provide ballasts."

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