Symantec, CommScope improve despite weak quarterly results; Life Technologies paper better

By Rebecca Melvin

New York, July 29 - Convertible bond investors continued to react to earnings news pouring into the market Thursday, with a few names called "improved" as their underlying shares got whacked on weak numbers.

"The bid is still there in convertibles; bonds are holding up relatively favorably," a New York-based trader said of convertibles and earnings season.

Symantec Corp.'s convertibles held in as shares of the security and software company fell 11% on mixed results for its fiscal first quarter. Profit was in line with estimates, but revenue was lower than expected.

CommScope Inc.'s convertibles were lower, but not by as great a drop as in the underlying shares after the communications cable maker posted slightly better-than-expected quarterly profit but forecast weak third-quarter sales, saying it would be difficult to grow operating income this year.

Life Technologies Corp. saw its convertibles better in trade as underlying shares of the biotechnology tools company fell despite better-than-expected earnings and revenue that was up 9%.

Meanwhile, Bill Barrett Corp.'s convertibles were getting a once over after company news that caused shares to pop.

And ahead of an expected earnings release after the market close, Amgen Inc. was mostly quiet and steady. The biotechnology giant posted an earnings beat after the close, but the company's shares remained little changed to slightly lower in after-hours trade.

Volume light

Convertibles trading volume was fairly light, with three names including Symantec, Life Technologies and Great Atlantic & Pacific Tea Co. accounting for more than $45 million of shares, out of a total of $685 million that changed hands as of late afternoon, according to Trace data.

Volumes haven't been what they should be, traders have complained, and new issuance has lagged especially considering that August is around the corner, and typically the quietest month of the year in the markets.

Nevertheless, "earnings have been generally good into this season so far, maybe because markets were setting the bar low after the correction in May and June," a New York-based convertibles analyst said.

On Thursday, stocks pared losses in a whipsaw session but still finished in negative territory.

Symantec holds in, shares lower

Symantec's 0.75% convertibles due 2011 traded last at 99.375, which was down about a point, versus a share price of $13.03 on Thursday. The 0.75% notes had traded as low as 98.75 during the session, according to Trace data.

Symantec's 1% convertibles due 2013 traded at 101.25 versus a share price of $13.03, and compared to 104.625 versus a share price of $14.75 on July 16.

Shares of the Cupertino, Calif.-based computer security solutions provider were down $1.64, or 11%, to $13.03 on Thursday.

Symantec, which is considered a very strong credit and a stable business, reported late Wednesday fiscal first-quarter earnings of 20 cents per share, up from a 2009 first-quarter loss and compared to the consensus estimate of 35 cents per share.

Revenue increased 2% year over year to $1.43 billion, compared to the consensus estimate of $1.47 billion.

For the current quarter, Symantec expects revenue of $1.445 billion to $1.465 billion, with earnings of 27 cents per share to 28 cents per share, which is below analysts' estimates of $1.53 billion and earnings of 34 cents a share.

Symantec chief executive Enrique Salem said in a statement that the company "saw lengthening of procurement cycles driven by continued cautiousness among IT buyers" during the last quarter.

CommScope better on share drop

CommScope's 3.25% convertibles due 2015 traded at 104.8 during the session, which was down nearly 14 points on the day, and which compared to an 18% slide in the common shares of the Hickory, N.C., network infrastructure company.

The shares fell $4.71 to $21.36 on Thursday.

For the second quarter, CommScope earned $44.2 million, or 43 cents a share, compared with $15.4 million, or 18 cents a share, in the year-ago period.

Excluding special items, the company earned 55 cents a share, beating market estimates of 54 cents a share.

Revenue rose 7% to $838.1 million, topping analysts' expectations of $833.2 million.

CommScope's U.S. sales jumped 12% to $469.1 million. But the company cited economic uncertainty and regulatory issues in India that could restrain infrastructure spending.

The company forecast third-quarter revenue of $815 million to $865 million, which was below the previous estimate of $869.7 million

Life convertibles mostly better

Life's 3.25% convertibles due 2025 traded at 106.9 late in the session, which was down a point on the day, while shares of the Carlsbad, Calif.-based biotechnology tools company, formerly known as Invitrogen Corp., fell $2.78, or 6.2%, to $42.40.

Life's 1.5% convertibles due 2024 traded last at 110, which was down 0.125 point on the day.

But the $349.54 million of Life's 2% convertibles due 2023, which are being called next week, traded down nearly 13 points on the day to 123.8.

Life announced the Aug. 6 redemption of the 2% convertibles earlier this month.

The life sciences and biotechnology tools company beat estimates by 4 cents, reported revenues in line with estimates, and guided for full-year earnings in line with the previous forecast.

The company earned $110.6 million, or 58 cents per share, for the latest quarter, up from $38.9 million, or 22 cents per share, for the same quarter in 2009.

Revenue rose 9% to $903.7 million from $832.8 million.

Excluding charges, the company earned 91 cents per share, which compared to estimates of 87 cents per share on $903.4 million in revenue.

During the quarter, revenue for its genetic systems division rose 5%, to $235 million, while revenue at the molecular biology division rose 6% to $434 million. Cell systems division revenue rose 13% to $230 million.

For full-year 2010, the company expects to earn between $3.35 and $3.50 per share. Analysts expect net income of $3.44 per share.

Bill Barrett dips

Bill Barrett's 5% convertibles due 2028 were quoted at 100.25, down 0.125 point.

Shares of the Denver-based oil and natural gas exploration company jumped $2.80, or 8%, to $34.91 after the company announced that it received federal approval to develop natural gas fields in Utah called the West Tavaputs by agreeing to use new technology to drill under wild areas.

Amgen quiet ahead of earnings beat

A closing market on Amgen's 0.125% convertibles due 2011 was seen at 99.375 bid, 99.5 offered, with a trade around 99.5, which was mostly unchanged on the day.

Amgen's 0.375% convertibles due 2013 were last at 99.5, which was down 0.25 point.

The Thousand Oaks, Calif.-based biotech giant's results topped estimates. But Amgen said that 2010 revenue will be below its previous $15.1 billion estimate due to the weaker euro.

The company earned $1.2 billion, or $1.25 per share, in its most recent quarter, compared to $1.3 billion, or $1.25 a share, for the same quarter in 2009.

Excluding items, the company would have earned $1.38 a share, which compared to estimates of $1.29 per share.

Revenue was $3.8 billion compared to $3.7 billion in the same period last year and versus an estimate of $3.75 billion.

Mentioned in this article:

Amgen Inc. Nasdaq: AMGN

Bill Barrett Corp. NYSE: BBG

CommScope Corp. NYSE: CTV

Life Technologies Corp. Nasdaq: LIFE

Symantec Corp. Nasdaq: SYMC

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