Positive earnings reports from banks lifted stocks on Wednesday. The Dow Jones Industrial Average (^DJI -1.63%) and the S&P 500 (^GSPC -1.54%) both opened higher and stayed in the green all day.
Today's stock market
| Index | Percentage Change | Point Change |
|---|---|---|
| Dow | 0.59% | 141.57 |
| S&P 500 | 0.22% | 5.80 |
Data source: Yahoo! Finance.
Bank stocks were by far the best performers today, with the SPDR S&P Bank ETF (KBE -3.01%) jumping 2.5%. Consumer stocks slumped, though; the Consumer Staples Select Sector SPDR ETF (XLP -1.34%) fell 0.5%.
As for individual stocks, United Continental Holdings (UAL 3.27%) capped a successful 2018 with strong growth in the fourth quarter, and Goldman Sachs (GS -3.45%) beat earnings expectations.
Image source: Getty Images.
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 prediction 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 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. But reasonable performance in a challenging quarter helped the stock regain some ground from losses in 2018.
