Goldman Sachs' earnings estimates raised

Goldman Sachs Group Inc. is likely to benefit from an improving financial environment, including increased corporate underwriting and mergers and acquisitions activity, an analyst said Tuesday. FBR Capital Markets analyst Steve Stelmach raised his 2009 and 2010 earnings estimates as well as his price target for the New York-based bank's stock because of expectations for an improved market. Stelmach increased his price target to $205 from $175. Shares of Goldman closed Monday at $182.39. In a research note, Stelmach said, "Our increased earnings expectations reflect a more sustainable environment for a higher average return on assets, which will serve to offset continued uncertainty around ultimate leverage ratios." Even though Goldman has had to reduce leverage since the financial crisis peaked last year, its strength in the investment banking sector should help it generate strong returns on its assets, Stelmach said. Goldman is also poised to take advantage of the dwindling competition, which should support it in areas such as advisory revenue from mergers and acquisitions, Stelmach said. He conservatively predicts the bank will generate $1.8 billion in mergers and acquisitions advisory revenue in 2010. Stelmach raised his 2009 earnings estimate to $16.21 per share from $14.68 per share. Analysts polled by Thomson Reuters, on average, forecast earnings of $16.71 per share. Goldman is now likely to earn $18 per share in 2010, Stelmach said. He previously predicted the bank would earn $16 per share in 2010. Analysts predict Goldman will earn $17.52 per share in 2010.