U.S. stocks gained some ground on Thursday after investors weighed a mixed bag of quarterly earnings news against reports that U.S.-China trade talks have stalled as the two countries grapple over stateside restrictions on Chinese firm Huawei. The gains were slight, however, with the Dow Jones Industrial Average (DJINDICES: ^DJI) and the S&P 500 (SNPINDEX: ^GSPC) barely edging into positive territory by market close.
As for individual stocks, shares of Netflix (NASDAQ: NFLX) and Phillip Morris (NYSE: PM) kept investors on their toes following their respective second-quarter reports.
A rare subscriber decline for Netflix
Shares of Netflix sank 10.3% after the video-streaming pioneer told investors it lost 126,000 paid subscribers in the United States last quarter — well below estimates for a gain of 352,000 and marking its first stateside decline since 2011. That brought Netflix’s domestic paid subscriber base to 60.1 million.
Meanwhile, Netflix added “just” 2.8 million paid international members during the quarter, again far below the 4.8 million most investors were expecting, leaving it with a net gain of 2.7 million global paid subscribers. By comparison, three months ago the company told investors it was targeting a global paid subscriber increase of closer to 5 million.
But Netflix management downplayed the impact of competitive streaming services on subscriber growth. Rather, the company largely blamed a combination of regional price increases, a greater-than-expected “pull-forward” effect after adding an incredible 9.6 million subscribers in Q1, and a weaker content slate for the second quarter.
That said, Netflix anticipates subscriber growth to reaccelerate soon, as it predicts 7 million global paid net additions in the third quarter, driven by new seasons of The Crown, Orange Is the New Black, and Stranger Things.
Philip Morris smokes estimates
Meanwhile, shares of Philip Morris jumped 8.2% after the cigarette and tobacco products giant delivered a strong quarter and raised its full-year earnings outlook.
Philip Morris’ revenue declined 0.3% as reported to roughly $7.7 billion — well above the $7.37 billion most analysts were expecting — but would have increased 5.4% had it not been for the negative impact of foreign currencies. That translated into adjusted net income of $2.31 billion, or $1.46 per share, up from $1.41 in the year-ago period and exceeding consensus estimates for $1.32 per share.
Within its top line, the company saw heated tobacco unit shipment volumes soar 37%, largely driven by its new IQOS product line, which nearly offset a 3.6% decline in shipments from its core cigarette business.
As such, Philip Morris raised its full-year guidance for adjusted earnings to arrive at roughly $5.14 per share, up $0.05 per share from its previous target.
