UAL, JetBlue trade up; Fifth Third, Wells Fargo gain, but Citi drops; Thermo Fisher weakens

By Rebecca Melvin

New York, April 23 - A couple of airline names - after moving up in trade Wednesday - remained in trade Thursday amid an avalanche of earnings in that sector.

UAL Corp. mostly hung onto gains notched Wednesday but didn't strengthen Thursday in line with their underlying shares, which gained 3%.

Meanwhile, a JetBlue Airways Corp. convertible edged higher after the New York-based low-cost carrier swung to a profit, posting $12 million in earnings, compared with a loss of $10 million a year earlier.

JetBlue and low-cost carrier AirTran, which also posted a quarterly profit, were positives among most other U.S. carriers that posted losses.

Financials moved mostly to the upside Thursday, with Fifth Third Bancorp convertible preferreds jumping on positive earnings, while Wells Fargo & Co. sported a solid gain. But Citigroup Inc. was significantly weaker.

Thermo Fisher Scientific Inc.'s floating-rate convertibles fell sharply along with their underlying shares after the maker of scientific instruments posted a 35% drop in profit for the first quarter and lowered its outlook for the year, citing the global recession, curtailed customer spending and a stronger dollar.

In the primary market, it appeared that convertible players were turning up a finicky nose to Old Republic International Corp.'s $250 million of three-year convertible senior notes, which were expected to price after the close Thursday.

Several sellside sources said that there had seen nothing at all on Old Republic in the gray market. But a New York-based buysider said the Old Republic offering had "excellent terms" and represented "an interesting turnaround situation."

The buysider reported a gray market at 101.25 bid, 102.75 offered as of early afternoon.

Overall the convertibles market was mixed, with one sellsider saying it felt palpably weaker, but with another sellsider seeing a better tone early with many names ending the day at their session highs.

UAL gains

UAL's 5% convertibles due 2021 traded at 47.5 early - a level to which they had climbed Wednesday - and later were seen in trade at 47.

The UAL 4.5% convertible due 2021 traded at 42.5 early in the session and later was at 42.

"A bunch just traded there," a New York-based sellside trader said, noting that there's a 5-point spread between the two issues.

The stock of the Chicago-based holding company of United Airlines moved up 21 cents, or 3.4%, to $6.39.

In its earnings report Tuesday, UAL reported a net loss for the first quarter of $579 million, and revenue fell 22%. But it improved its full-year outlook for non-fuel costs.

UAL was "disproportionately hit by premium segment declines," according to a CreditSights note published Wednesday.

The revenue drop year over year was driven primarily by lower capacity, load factor, and yield across almost all sectors, the CreditSights analysts, Roger King, Aidas Baublys, and Brian Studioso, wrote. CreditSights is an independent research firm.

"UAL has been the proverbial melting iceberg, as it has no aircraft orders and very little capex," the CreditSights analysts said. But they said this is appropriate given industry conditions and the need to conserve cash.

They said unrestricted cash is $2.5 billion. Restricted cash is $255 million and hedge counterparty deposits were $570 million at the end of the quarter.

"Despite three years of bankruptcy and the elimination of its pension exposure, unit costs remained higher than its network peers. Cost cutting has quickened, first due to fuel prices and even more so now on top-line issues - especially as premium service is the hardest hit segment," the analysts said.

Meanwhile, management, the analysts noted, "got a tad feisty when equity analysts challenged the wisdom of hunkering down to the extent UAL has. It will take a rising tide to turn this airline around."

JetBlue's 3.75% due 2035 traded up to 91.75 and was pretty steady there, the sellside trader said.

He did not see JetBlue's other convertible issues, including a 3.5% issue due 2033 and its newer 5.5% convertibles.

JetBlue shares settled up 7 cents, or 1.25%, to $5.65.

Fifth Third, Wells Fargo up, Citi down

Fifth Third's 8.5% series G perpetual convertible preferreds were seen closing at 54.5, which was up from a previous level of about 50.52.

Shares of the Cincinnati-based financial services company added 13 cents, or 3.5%, to $3.82.

The regional bank posted a better-than-expected loss of $26 million for the quarter, compared with a $285 million profit in the same period last year.

It earned 4 cents a share, which was better than the 27-cent loss per share that was expected.

Initially shares jumped 10%, but they dropped back later in the session.

The company said it has moved aggressively to cut its risk in hard-hit real estate markets such as Florida and Michigan.

The bank's chief executive, Kevin Kabal, said in a news release that a substantial margin improvement in the first quarter should continue in the second quarter.

Wells Fargo's 7.5% preferreds traded up to 598, compared to 574.52 seen previously. Shares of the San Francisco-based bank gained steadily through the session, to end up $1.91, or 10.5%, to $20.09.

Meanwhile Citigroup's 6.5% preferred traded down to 18.65, a New York-based sellside trader said.

Thermo Fisher drops

Thermo Fisher's floating-rate senior debentures due 2033, formerly the paper of Apogent Technologies Inc., were 115 bid, 116 offered in late session trading, which was down from a previous level in the mid- to upper 120s.

The floaters traded actively in Thursday's session, a New York-based sellsider said.

Shares of the Waltham, Mass.-based company fell $2.80, or 8%, to $32.39 in active trade.

The company posted worse-than-expected earnings of $148.9 million, compared to $229.7 million in the year-ago period. Revenue dropped 12% to $2.26 billion.

In addition, the company cut its earnings and sales forecast for the year.

"The tough economy had a significant impact on our results for the first quarter, particularly in our instrumentation and equipment businesses," chief executive Marijn Dekkers said in a statement.

"Our customers are clearly delaying their capital purchases in the current environment. In addition, our revenue growth was affected by considerable foreign currency exchange headwinds. On a positive note, we generated record free cash flow of more than $310 million for the quarter," Dekkers said.

Mentioned in this article:

Citigroup Inc. NYSE: C

Fifth Third Bancorp Nasdaq: FITB

JetBlue Airways Corp. Nasdaq: JBLU

Old Republic International Corp. NYSE: ORI

Thermo Fisher Scientific Inc. NYSE: TMO

UAL Corp. Nasdaq: UAUA

Wells Fargo & Co. NYSE: WFC

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