Holiday holds down volume; Palo Alto Networks, Dycom convertibles trend lower after earnings

By Stephanie N. Rotondo

Seattle, Nov. 22 – Liquidity in the convertible bond market remained thin ahead of the Thanksgiving holiday, a trader reported on Tuesday.

The space was also trending mostly lower, lead by the day’s most notable names, Palo Alto Networks Inc. and Dycom Industries Inc.

Both of those companies were in decline in the wake of weak earnings.

Palo Alto’s 0% convertible notes due 2019, for instance, dropped about 16 points outright, according to one market source.

The source pegged the issue at 137.5.

Another source saw the issue at 138.625, which compared to 153.325 on Monday.

Early in the session, a trader said the paper was trading in a 137.75 to 140 context, “on an 80% delta, all day long.”

The stock meantime fell $21.38, or 13.27%, to $139.68.

The cyber security firm posted results on Monday that showed a gain in revenue, though at the slowest pace since the company went public. The company also warned that revenue growth might remain weaker than usual for the current quarter.

Additionally, the company reported a 55% surge in stock-based compensation, which weighed on the bottom line.

For the fiscal first quarter, net loss widened to $61.8 million, or 69 cents per share, from $39.9 million, or 47 cents per share, the year before.

Excluding certain items – including the stock compensation – profit increased to 55 cents from 34 cents per share

Revenue was up 34% year over year at $398.1 million. That amounted to the smallest increase the company has seen. Revenue was also impacted by a 39% increase in operating expenses.

Billings gained 33% to $516.9 million, though analysts polled by FactSet had predicted $525 million.

Analysts polled by Thomson Reuters had forecast adjusted EPS of 63 cents on revenue of $438.8 million.

In other earnings news, Dycom Industries came out with results that beat on a per-share basis but missed revenue estimates.

The company’s 0.75% convertible notes due 2021 tanked in response, following the equity lower.

A market source pegged the issue with a 106 handle, down nearly 12 points on the day.

A second source quoted the paper at 105.5 bid, 106 offered.

At mid-morning, a trader placed the convertible debt in a 105.75 to 106.125 range, versus a stock price of $75.00.

He noted that the stock was down as much as $18.00 in early trading. By the bell, the equity had traded off $18.89, or 20.32%, to $74.06.

As for the bonds, they had previously traded in a 117 to 118 context.

For its fiscal first quarter, Dycom posted EPS of $1.67 on revenue of $799.22 million. For its part, revenue was up 21.2% year over year.

However, analysts had forecast EPS of $1.65 on revenue of $801.34.

The company also provided guidance for the current quarter, setting adjusted EPS expectations in a range of 61 cents to 73 cents. Revenue is expected to be between $640 million and $670 million.

Analysts are predicting EPS of 72 cents.

Dycom is a Palm Beach, Fla.-based provider of skilled contract workers.

Mentioned in this article:

Dycom Industries Inc. NYSE: DY

Palo Alto Networks Inc. NYSE: PANW

© 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.