Dean Foods better despite negative earnings; Mallinckrodt mixed on earnings beat

By James McCandless

San Antonio, May 7 – The distressed space refocused its attention on names tied to earnings releases.

Dean Foods Co.’s notes finished better despite lackluster earnings as the company signals a turnaround.

Meanwhile, Mallinckrodt plc’s issues were mixed after releasing first-quarter earnings on Tuesday morning.

Sector peer Teva Pharmaceutical Industries Ltd.’s paper was also mixed.

Elsewhere, Adient plc’s notes were falling after its own earnings release.

A day after reporting its earnings, Hertz Global Holdings Inc.’s issues were pushing higher during the session.

In oil and gas, California Resources Corp.’s and Ensco Rowan plc’s paper followed oil futures lower as McDermott International, Inc.’s notes gained.

Retailer PetSmart, Inc.’s issues closed the day mixed.

Dean Foods jumps

Dean Foods’ notes finished the day better despite earnings results, traders said.

The 6½% notes due 2023 jumped up 4 points to close at 55½ bid.

By the close, the 6½% notes saw about $47 million trading.

On Tuesday morning, the Dallas-based dairy products company released its first-quarter earnings report.

The name showed a 41 cents per share loss, wider than what analysts expected at a 22 cents per share loss.

Its revenues of $1.8 billion were also lagging behind estimates.

Despite this, the market grabbed onto the company’s expectation that by the end of the second quarter, it will generate cash in what it hopes is the start of a turnaround.

“They think they’ll have a net positive cash flow,” a trader said. “From the looks of it, the cost cutting they’ve shown is a good start.”

The company’s structure has been pushed further into distressed territory of late after the company announced a strategic alternatives review, opening up the possibility of a takeover.

Mallinckrodt, Teva mixed

Meanwhile, in the health care space, Mallinckrodt’s issues closed mixed, market sources said.

The 4¾% notes due 2023, swinging between 72 and 75 throughout the day, landed level at 73¾ bid. The 5 5/8% notes due 2023 tacked on ½ point to close at 78¾ bid.

The Staines-upon-Thames, U.K.-based drug maker also released its first-quarter earnings Tuesday.

The company posted earnings of $1.94 per share, outpacing analyst predictions of $1.73 per share.

Its revenues for the quarter also exceeded expectations at $790.6 million.

The name’s tranches have been under pressure since the U.S. Department of Justice announced that it would be joining two whistleblower lawsuits against the company.

A company acquired by Mallinckrodt is accused of improperly promoting an expensive multiple sclerosis drug and paying doctors who prescribed it.

Petach Tikva, Israel-based sector peer Teva’s paper ended the session similarly mixed.

The 4.1% paper due 2046 rose ¼ point to close at 71½ bid. The 3.15% paper due 2026 fell ¼ point to close at 83½ bid.

Adient falls

Elsewhere, Adient’s notes were falling on Tuesday, traders said.

The 4 7/8% notes due 2026 shaved off ¾ point to close at 78 bid.

The Dublin-based car seat manufacturer issued its second-quarter earnings report early Tuesday.

The company reported a 31 cents per share profit, contrasted to analyst predictions of a 39 cents per share profit.

Despite the miss, the name beat revenue expectations with $4.23 billion.

The company’s notes have pushed higher in recent weeks after a series of analyst upgrades and a refinancing deal gave the bonds a boost.

Hertz higher

Hertz, another automotive name, saw its issues trading higher, market sources said.

The 5½% notes due 2024 gained ½ point to close at 88¼ bid.

After the close on Monday, the Estero, Fla.-based vehicle rental company’s first-quarter earnings results were released.

The name reported a 99 cents per share loss, faring slightly better than the expected $1.32 per share loss.

Revenues were underperforming at $2.11 billion.

Oil futures lose

Distressed oil tranches trended lower, following oil futures, traders said.

Los Angeles-based independent oil and gas producer California Resources’ paper fell in the session.

The 6% paper due 2024 dropped 2¼ points to close at 65 bid. The 8% paper due 2022 declined by 2¾ points to close at 76½ bid.

The company recently reported a 63 cents per share profit, beating analyst estimates of a 50 cents per share profit.

London-based contract driller Ensco Rowan’s notes were also negative.

The 7¾% notes due 2026 lost 1¼ points to close at 83 bid. The 5.2% notes due 2025 fell ½ point to close at 78 bid.

Houston-based oil and gas engineering name McDermott’s issues bucked the sector trend, improving.

The 10 5/8% notes due 2024 picked up 1¼ points to close at 92 bid.

West Texas Intermediate crude oil futures for June delivery closed the session 85 cents lower to $61.40 per barrel.

North Sea Brent crude oil futures for July delivery finished at $69.88 per barrel after a $1.36 drop.

PetSmart mixed

Retailer PetSmart’s paper closed the day mixed, market sources said.

The 8 7/8% paper due 2025 slipped 1¼ points to close at 91¾ bid. The 5 7/8% paper due 2025 added ¼ point to close at 93¼ bid.

The Phoenix-based pet supplies chain is closer to launching a $100 million initial public offering for its e-commerce arm Chewy.com.

The division had recently been a source of contention and litigation between the company and its creditors after a 2018 private equity transfer of a large portion of Chewy.com.

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