Cemex unchanged with earnings; Cepheid adds a little as shares slide; Spirit Capital stronger

By Rebecca Melvin

New York, July 18 – Cemex SAB de CV’s 4.875% convertible bounced around in tandem with the underlying shares of the Monterrey, Mexico-based cement producer on Friday on an outright basis, and ended unchanged on a dollar-neutral, or hedged, basis, after the company missed earnings estimates on higher revenue.

Cepheid’s convertibles were lower on an outright basis, but edged up on a hedged basis after the Sunnyvale, Calif.-based molecular diagnostic tests company posted second-quarter earnings that beat estimates by a penny but forecast full-year earnings that were well below analysts’ estimates. The shares sank 9%.

Spirit Realty Capital Inc. saw its two convertible bonds continue to rally back on a swap basis, recouping losses mounted since the dual tranches priced in May.

Otherwise, trading was described as “dull” in U.S. convertibles on Friday.

Equities rebounded from losses notched Thursday when investors were rattled by news of a civilian passenger jet being shot down by a missile near the Russia-Ukraine border, killing all 295 passengers onboard.

Of the major stock indexes, the S&P 500 bounced 20.10 points, or 1%, to 1,978.22, after losing 1.2% on Thursday; the Dow Jones industrial average jumped 123.37 points, or 0.7% to 17.110.18, after falling 0.9% on Thursday; and the Nasdaq stock market gained 68.7 points or 1% to 4432.15, after dropping 1.4% on Thursday.

The day’s focus was still on the geopolitical situation and questions regarding the tragedy remain unanswered, but the United States said the Malaysia Airlines plane was likely shot down by a missile in rebel territory.

One trader said the bounce could be explained by the thinking that the downed plane, as tragic as it is, may ultimately lead to improved stability in the region as Russia is forced to rein in the rebel separatists and pull back from the situation.

Cemex unchanged

The three Cemex convertibles were largely unchanged on a dollar-neutral, or hedged, basis, as shares of the Monterrey, Mexico-based cement producer added 2.6%.

Cemex’s 4.875% convertibles due 2015 were seen bid at 122.75 with the underlying shares at $12.89, a New York-based trader said Friday. The bond also printed higher at 125.371 and as high as 126, according to Trace data.

Cemex shares ended better by 33 cents at $13.22.

Cemex’s 3.25% convertibles due 2016 hadn’t traded early Friday but were later seen changing hands at about 145, which was up compared to 141.625 previously.

The Cemex 3.75% convertibles due 2018 were also not heard in trade early Friday, but were seen to have traded at 150, according to Trace data.

Cemex swung to a profit for its second quarter but its results missed estimates. EBITDA was $737 million, up from $730 million in the year earlier period but below analysts’ estimates of $768 million.

Net sales rose 4% to $4.2 billion, boosted by higher prices and higher sales volume in the United States as well as the company’s its Mediterranean, South, Central America and Caribbean and Asia regions, the company said.

Cepheid edges up on hedge

Cepheid’s 1.25% convertibles due 2021 were seen trading between 98 bid and 98.25 to 98.5 offered with the underlying shares at $42.00.

That was lower outright but “up a little bit, like 0.25 point” on a hedged basis, a New York-based trader said.

Trading was fairly light, but on a 60% delta with a 10% stock drop the notes looked slightly better, he said.

The stock ended down $4.28, or 9.3%, at $41.90.

Cepheid priced $345 million of the convertible senior notes in February.

Cepheid reported a wider second-quarter net loss of $9.8 million, or 14 cents per share, compared with a net loss of $6.6 million, or 10 cents per share, in the second quarter of 2013.

Excluding stock-based compensation expense and other items, net income for the second quarter was $2.3 million, or 3 cents per share, compared to $1.2 million, or 2 cents a share in the year-earlier period, a penny better than estimates.

But looking ahead, Cepheid predicted that revenue would be $452 million to $461 million and that earnings would come in at 10 cents per share to 13 cents per share. This was more or less in line with analysts’ revenue estimates for $459.8 million, but it fell well short of estimated earnings of 20 cents per share for the year.

Spirit Realty strengthening

Spirit Realty’s 2.875% convertible due 2019 traded around par with the underlying shares at $11.46 at Friday’s close.

Spirit Realty’s 3.75% convertibles due 2020 traded at the same level.

Shares of the Scottsdale, Ariz.-based real estate investment trust added a dime, or 0.9%.

“The SRCs are trading a little bit, and are a little better at around par for both the As and the Bs. They are continuing to do better and rally on swap,” a New York-based trader said.

The dual tranches, of which $747.5 million priced in May, had traded well on their debut, but subsequently weakened.

“They came in. It seems like all the new issues were indiscriminately unloaded by participants who took them at issue, but weren’t true believers. It was a common theme. But I think they are cheap here,” a trader said of the Spirit Realty real estate investment trust’s convertibles.

Mentioned in this article:

Cemex SAB de CV NYSE: CX

Cepheid Nasdaq: CPHD

Spirit Realty Inc. NYSE: SRC

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