News of a draft Brexit agreement and some positive earnings reports boosted major benchmarks on Thursday. The Dow Jones Industrial Average (DJINDICES:^DJI) and the S&P 500 (SNPINDEX:^GSPC) had relatively small gains, but advancing stocks outnumbered decliners by 2 to 1. Small caps did particularly well, as did the healthcare sector.
Today's stock market
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Netflix rises on subscriber growth, strong profit
Netflix pleased investors with its third-quarter results, beating its revenue and profit guidance while coming close to meeting its membership forecast, and shares rose 2.5%. Revenue grew 31% to $5.44 billion, compared to the company's estimate of $5.25 billion. Earnings per share jumped 65% to $1.47, but that number includes a noncash, unrealized gain of $171 million from revaluing the streaming specialist's euro-denominated debt due to currency movements. Excluding that paper gain, it still earned $1.09 per share, ahead of the $1.04 management said to expect.
Last quarter, Netflix reported disappointing subscriber numbers, but this time it nearly nailed its forecast. The company gained 6.77 million paid subscribers compared with the 7 million it had said to expect. That's a narrow miss, but it was much better than the 2.7 million additions last quarter and the 6.07 million added in Q3 last year, and total membership climbed 21% year over year. Netflix picked up 520,000 members in the U.S.
Investors have been worried about increased streaming competition, but Netflix officials brushed off the concerns, saying that competition is business as usual and forecasting 7.6 million subscriber additions in Q4, including 600,000 new members in the U.S.
Union Pacific manages EPS gain despite drop in volume
Union Pacific was the latest railroad company to announce third-quarter earnings, and despite missing expectations for revenue and profit, shares inched up 0.2%. Revenue fell 7% to $5.52 billion and earnings per share rose 3.2% to $2.22. Analysts were expecting earnings of $2.30 per share on revenue of $5.63 billion.
Falling freight volumes were to blame for the decline, although the company offset some of the losses with price increases and controlled costs by cutting its workforce 13% and improving efficiency. Freight revenue fell 7% on an 8% drop on volume, led by a 17% decline in coal volume. Premium freight volumes, including auto, auto parts, and intermodal shipments fell 11%, hurt by slumping auto production and the impact of tariffs and trade uncertainty. On the positive side, a strong construction market drove a 2% increase in industrial volumes.
Shareholders had some reasons to be encouraged. Union Pacific's operating ratio improved 2.2 percentage points to an all-time record, and share buybacks turned a 2.4% decline in net income into an increase in earnings per share.