Morning Commentary: Omnicell convertible notes in focus with stock crushed post-earnings

By Abigail W. Adams

Portland, Me., Nov. 2 – It was a relatively quiet morning in the convertibles secondary space as the market awaited the Federal Open Market Committee’s afternoon announcement.

While there is little doubt the Federal Reserve will raise interest rates by another 75 basis points, there is a great deal of uncertainty about the path going forward.

Renewed optimism about a dovish pivot from the Fed fueled the surge in risk assets the previous week.

However, the markets were expressing some doubt heading into Federal Reserve chair Jerome Powell’s press conference.

Equity indexes were in the red early in the session with the Dow Jones industrial average down 99 points, or 0.30%, the S&P 500 index down 0.46%, the Nasdaq Composite index down 0.54% and the Russell 2000 index down 1.04% shortly before 11 a.m. ET.

There was $65 million of convertibles trading activity on the tape about one hour into the session.

Earnings related volatility remained the main driver for activity in the space with Omnicell Inc. the name of the day.

Omnicell’s 0.25% convertible notes fell 12 points outright with stock off about 25%.

The notes were changing hands at 87.5 versus a stock price of $55.08 early in the session, according to a market source.

There was $13 million in reported volume.

Omnicell’s stock was seen at $57.63, a decrease of 24.53% shortly before 11 a.m. ET.

The health care technology company beat on the bottom line with earnings per share of $1 versus analyst expectations of 95 cents.

However, the company missed on the top line with revenue of $348 million versus the $363 million expected and downwardly revised its fourth-quarter guidance, which caused its stock to plummet.

Omnicell expects earnings per share of 5 cents to 15 cents in the fourth quarter, a significant reduction from previous guidance for an EPS of 93 cents to $1.

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