GT Advanced expands as shares surge on earnings; DryShips higher; Cepheid trades actively

By Rebecca Melvin

New York, Feb. 24 - GT Advanced Technologies Inc.'s 3% convertibles due 2020 traded higher on both an outright basis and dollar-neutral, or hedged, basis on Monday after the Merrimack, N.H.-based solar and LED industries technology company reported fourth-quarter results and updated guidance, a New York-based trader said.

The newer GT Advanced 2020 notes, which priced Dec. 4, closed up at 140.625 bid, 141.375 offered versus a share price of $14.14, which was up more than 12 points outright and up about 0.5 point on a dollar-neutral basis, compared to Friday, the trader said.

Elsewhere, DryShips Inc. made a splash in Monday's market, with the convertibles of the Athens-based dry bulk shipping and tanker company trading actively and a little higher with the underlying shares up 2%.

Meanwhile, there were no new issues launched or priced in the primary market. But Cepheid Inc.'s newer 1.25% convertibles due 2021, which priced on Feb. 4, were quoted at 107.875 bid, 108.375 offered versus an underlying share price of $53.67.

The Cepheid convertibles continue to trade, a Connecticut-based syndicate source said.

Cepheid is a Sunnyvale, Calif.-based molecular diagnostics company. Shares were little changed on Monday and are up about 9% from issue.

Equities moved higher on Monday but ended off their session highs, following a sharp turn lower into Friday's market close.

The Dow Jones industrial average gained 103.84 points, or 0.6%, to 16,207.14; the S&P 500 stock index rose 11.36 points, or 1.2%, to 1,847.61, after topping its Jan. 15 record closing level of 1,848.28 intraday, and the Nasdaq stock market put on 29.56 points, or 0.7%, to 4,292.97.

The S&P set an intraday high and subsequently closed just shy of that mark, meaning that the index has erased all of its 5.8% swoon earlier this year. On the radar for this week in terms of economic data is the second reading of fourth-quarter gross domestic product, which is expected to show a modest downward revision.

GT Advanced expands

The newer GT Advanced 2020 notes, which priced Dec. 4, jumped about 10 points early on to 135.75 versus an underlying share price of $13.20, a trader said, and that was up about 0.625 point on a dollar-neutral basis.

But the shares kept moving, and the convertibles moved up as well, closing at 140.625 bid, 141.375 offered versus an underlying share price of $14.14, which was better by 0.5 point dollar neutral.

GT Advanced's older 3% convertibles due 2017 ended the day at 196.625 bid, 197.375 offered versus a share price of $14.14, which was also about 0.5 point higher on a dollar-neutral basis.

Earlier the older convertibles traded at 186.125 bid, 186.875 offered with the underlying shares also at $13.20.

GT Advanced shares surged 10% in the early going Monday and ended higher by nearly 17%. Since Dec. 4, when the new convertible issue initially priced, shares have climbed more than 50%.

Shares ended up at $14.14, which was about a $2.00 climb, or 16.8%.

The securities spurted higher after the company's quarterly report, which included an earnings beat but a revenue miss, with guidance for the current quarter weaker than the consensus estimate. But full-year 2014 guidance was in line with prior guidance.

Revenue for the fourth quarter came in at $32.6 million, including $2.5 million in polysilicon, $11.3 million in photovoltaic and $18.8 million in sapphire. That compared to revenue in the third quarter of $40.3 million and $102.3 million in the fourth quarter of fiscal 2012.

Revenue for the year ended December was $299 million compared to $733.5 million in the year earlier.

During the fourth quarter the company received the first of a series of prepayments under its multi-year sapphire material supply agreement with Apple Inc. As of the end of December, the company's total backlog was $602.2 million in equipment orders only.

"The company expects that 2014 will be a transformational year, one in which it builds a sapphire materials business while continuing to invest in the new technologies that will drive its equipment business in 2015 and beyond," according to the company's release.

But for 2014, revenue and profitability will come predominantly in the second half, the company said.

Looking ahead, the company expects a current quarter loss of 20 cents per share to 25 cents per share Revenue for the whole first half is expected to only be about $105 million, or 15% of the midpoint of the year's total revenue estimate.

For the year, earnings are expected to be 20 cents to 25 cents per year on revenue of $600 million to $800 million. Non-GAAP earnings for the year will be in the range of 2 cents per share.

The company expects its sapphire technology can enable the development of new applications for sapphire material.

DryShips higher

DryShips' 5% convertibles due December 2014 traded at 98.875 bid, 90.125 offered on Monday in active trade, a New York-based trader said.

Shares of the shipping company were up 9 cents, or 2.6%, to $3.60.

"They were marginally better, by maybe a quarter point," the trader said.

Market players are eyeing the yield and the fact that the paper is pretty short dated at this point, the trader said. Other than that there didn't appear to be any particular reason behind the strength for this issue.

Mentioned in this article:

Cepheid Inc. Nasdaq: CPHD

DryShips Inc. Nasdaq: DRYS

GT Advanced Technologies Inc. Nasdaq: GTAT

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