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Markets Take Off on Q3 Earnings; NFLX, UAL Beat After Hours

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For now three of the past four trading days, stock market indices are looking hale and robust. We’re still off our mid-August peak, which itself is off the all-time highs we saw at the very start of the year (or late 2021, in the Nasdaq’s case), but we’ve sprung off 2022 lows with a fervor. And Q3 earnings — in the early going, at least — are more than living up to expectations.

The session highs were way back at the start of the day, but we closed with the Dow +341 points or +1.13%, the S&P 500 +1.16%, the Nasdaq +0.90% and the small-cap Russell 2000 +1.04%. Five-day trading gains are now +3-4% on the indices, and this is including a big sell-off going into the weekend last Friday.

Following two straight quarters of net subscriber losses, Netflix (NFLX - Free Report) is out with a gangbusters report on its Q3 earnings and sales, with net subscription adds more than double expectations. Earnings of $3.10 per share outpaced the Zacks consensus by more than a solid dollar, while revenues of $7.93 billion topped the $7.85 billion expected. This marks the fifth straight quarter beating earnings estimates, and by a wide margin.

But the big reason NFLX shot up +9% immediately — now +13% in late trading — upon the quarterly release is in the net add subscriptions. Analysts had expected a bounce-back from a disappointing first half of 2022, and it got it: 2.41 million net adds in Q3 was well ahead of the 1.09 million Netflix had earlier guided. For Q4, the streaming giant expects a whopping 4.5 million paid net adds.

These quarterly results are a real shot in the arm to a company down almost -60% year to date prior to this Q3 release. Curiously, after Q4, the company stated it will no longer guide future subscriber add numbers. This puts a fork in the road for investors: either Netflix expects an unflattering plateau in net adds for 2023 or, with the new and aggressive advertising schemes put into play to better position itself versus competition like Disney+ (DIS - Free Report) and Amazon Prime (AMZN - Free Report) , overall revenues will tell a much bigger story going forward.

United Airlines (UAL - Free Report) also posted better-than-expected quarterly results: earnings of $2.81 per share beat the Zacks consensus by 60 cents, while revenues of $12.87 billion not only surpassed the $12.71 expected, but represent the single-best sales quarter in the history of United. Revenue per Seat Mile grew +25.5% year over year, with Q4 guidance to +24-25%. Cost per Seat Mile rose +14.5%.

Next quarter earnings guidance is also something to behold: United now expects $2.00-2.25 per share, more than 2 1/2 times the Zacks consensus 83 cents. The company says it is now outpacing growth metrics based on pre-pandemic levels, with no signs of demand slowing down. Shares are up +7.5% in today’s aftermarket.

Earlier today, we saw higher Industrial Production and Capacity Utilization numbers for September, indicating stronger manufacturing productivity and efficiency, while the latest home builders’ survey from the National Association of Home Builders (NAHB) that sank to its lowest levels, not counting the Covid era, since August 2012. These figures demonstrate the U.S. economy still in growth mode while home prices continue to fall well off their peak. In fact, this is the 10th straight month lower on the NAHB index.

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