Analyst torpedoes own third-quarter forecasts

New York-based financial services giants Goldman Sachs Group Inc., Morgan Stanley and Lehman Brothers Holdings Inc. had their third-quarter earnings estimates slashed by Sanford C. Bernstein & Co. LLC analyst Brad Hintz in a research report issued today. Mr. Hintz estimated that Lehman will post a third-quarter loss of $1.40 a share, compared with the 74 cent profit previously estimated. He predicted Goldman Sachs will earn $2.50 a share, a 25% drop from a previous estimate of $3.35, and forecasted Morgan Stanley will earn 81 cents a share, a 22% reduction from a prior $1.04 prediction. The cuts are based in large part on continued exposure to the struggling residential mortgage-backed securities market and the weakening commercial real estate sector. “As long as these firms have troubled assets on their balance sheets, their earnings results will be affected by the fluctuations in the fixed-income market and the basis and roll risk of their hedging strategies,” Mr. Hintz wrote. Goldman, Lehman and Morgan Stanley are all scheduled to report their third-quarter earnings in mid-September. Sanford C. Bernstein & Co. LLC is a subsidiary of New York-based Alliance Bernstein LP.