Today's stock market
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Bank stocks were by far the best performers, with the SPDR S&P Bank ETF (NYSEMKT:KBE) jumping 2.5%. Consumer stocks slumped, though; the Consumer Staples Select Sector SPDR ETF (NYSEMKT:XLP) fell 0.5%.
United's growth plans are vindicated
Shares of United Continental took off, rising 6.4% after the company soundly beat expectations for the fourth quarter and predicted continued strong growth in 2019. Q4 revenue grew 11% to $10.49 billion, exceeding the analyst consensus of $10.35 billion, and adjusted earnings per share soared 67.4% to $2.41, well above the $1.98 Wall Street was expecting.
The key metric of passenger revenue per available seat mile (PRASM) rose 5%. Fuel expense rose 20.1% from the period a year ago, but excluding fuel and special charges, cost per available seat mile fell 0.7%. Available seat miles grew 6%, as United added 93 new routes in 2018 -- more than any other U.S. airline. The company plans to continue to grow capacity by 4%-6% in 2019 and guided to full-year EPS of $10 to $12.
Last January, investors rejected United's aggressive plans to increase capacity while maintaining margins and clearly doubted CEO Oscar Munoz's forecast of 2020 EPS of $11 to $13. A year later, that prediction looks decidedly conservative.
Goldman Sachs benefits from strong corporate dealing
Goldman Sachs reported better-than-expected fourth-quarter results, propelled by strong merger and acquisition activity, and shares soared 9.5%. Revenue of $8.08 billion was essentially flat from the period a year earlier, but beat expectations of $7.78 billion. Earnings per share of $6.04 topped the analyst consensus of $5.61.
Goldman's financial advisory business, which advises clients on mergers and acquisitions, led the company with a 56% revenue gain. Initial public offerings and debt issuance fell off in the fourth quarter, though, as companies pulled back on plans due to market volatility. Overall, Goldman's investment banking segment had a 4.5% drop in revenue.
Goldman Sachs still has the dark cloud of the 1MDB bond fund scandal hanging over it, with the company taking $516 million in provisions for litigation and regulatory proceedings in the quarter. Still, reasonable performance in a challenging quarter helped the stock regain some ground from losses in 2018.