WellPoint debt drifts down ahead of earnings; Herbalife convertibles, stock decline

By Stephanie N. Rotondo

Phoenix, July 29 – WellPoint Inc.’s 2.75% convertible notes due 2042 were trading actively but lower on Tuesday as investors prepare for the company’s earnings release on Wednesday.

A market source pegged the issue at 160.25 versus a stock price of $112.84. The bonds were down about 2.5 points on the day.

As for the stock, it closed down $3.02, or 2.61%, at $112.55.

For the second quarter, the health care benefits company is expected to report earnings per share of $2.26 on revenue of $18.21 billion. If the figures come in as expected, the earnings per share would equal a 13% decline year over year, while revenue would increase 2.6%. The revenue increase would be driven by an increase in Medicaid memberships, which have risen due to efforts made under Obamacare.

However, in the last two years, WellPoint has beaten estimates six out of eight quarters. There is some talk that the company will continue that trend in its report on Wednesday.

Herbalife takes a hit

In other earnings-driven names, Herbalife Ltd.’s 2% convertible notes due 2019 were coming in early Tuesday following the company’s disappointing earnings release late Monday.

The notes finished the session around 87.5. The paper was seen at 89.125 at mid-morning, down from 96.125 going out Monday. As for the stock, it was “down a lot,” a trader said.

The equity ended at $58.35, down $9.13, or 13.53%.

Investors were hoping that the dietary supplement seller would beat analysts’ expectations for the 22nd consecutive quarter. However, the company missed profit estimates by a penny.

Herbalife posted earnings of $1.55 per share on revenue of $1.31 billion. Analysts polled by Thomson Reuters had forecast earnings of $1.56 per share on revenue of $1.36 billion.

Despite missing estimates, the company raised its full-year guidance to $6.17 to $6.32 per share. Still, analysts were projecting $6.30 per share at the low end.

Herbalife has recently been in the news as investor Bill Ackman has decried the company as a pyramid scheme, holding a presentation last week in an effort to push the company out of business.

Ackman is short the stock, a bet totaling about $1 billion.

Right after the call, investors seemed to take Ackman’s allegations to heart, sending the stock downward. But the equity soon recovered and some investors – including Carl Icahn – have defended the company against Ackman’s claims.

Mentioned in this article:

WellPoint Inc. NYSE: WLP

Herbalife Ltd. NYSE: HLF

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.