Morning Commentary: Red Hat convertibles fall after earnings news, CFO exit; Micron pushes higher

By Stephanie N. Rotondo

Seattle, Dec. 22 – Though liquidity continued to be constrained in the convertible bond market, earnings news was pushing around Red Hat Inc. and Micron Technology Inc. on Thursday.

Red Hat announced earnings late Wednesday, which came in above analysts’ expectations. However, the company provided guidance for the fourth quarter and full year that was below analysts’ estimates.

Additionally, the company said Frank Calderoni, chief financial officer, was exiting his position to accept a chief executive officer position at another company.

In response, the company’s 0.25% convertible senior notes due 2019 followed the stock downward.

A trader pegged the bonds in a 117.5 to 117.75 context. The underlying equity (NYSE: RHT) was down over $10 to $69.78 in early dealings.

Meanwhile, Micron Technology’s 3% convertible senior notes due 2043 were faring better in the wake of its own earnings report.

A trader saw the convertibles at 102.875 at mid-morning.

“They have moved up over the course of the day,” the trader noted, as the issue opened around 102 to 102.25.

The stock (Nasdaq: MU) improved $2.68, or 13.05%, to $23.26.

Revenue jumped 23% in the first fiscal quarter of 2017, the semiconductor company reported. Earnings per share also beat expectations.

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