Chiquita Brands convertibles driving higher; Intel, Sandisk soften ahead of Cisco earnings

By Stephanie N. Rotondo

Phoenix, Aug. 15 - Volume in convertible bonds remained moderately active Wednesday, though down from Tuesday's levels, a trader said.

As per the usual, most of the trading took place in "investment-grade big-cap" names, he added.

Chiquita Brands International Inc.'s convertible debt was "moving higher," according to a trader. The gains came as Imperial Capital upgraded the common stock due to second-quarter results that beat expectations.

Meanwhile, Intel Corp. and Sandisk Corp. were on the busier side, but weaker ahead of earnings from Cisco Systems Inc.

Chiquita climbs higher

Chiquita Brands' equity was upgraded to outperform by Imperial Capital Wednesday.

In response, the 4.25% convertible notes due 2016 moved up to trade with a 79-handle, a trader said.

"This is a pure credit move," he said, adding that the stock was "not up much."

The stock closed up 17 cents, or 2.94%, to $5.95 on Wednesday.

Another trader pegged the convertibles at 78.5 bid, 79.5 offered.

Imperial's equity upgrade came after Chiquita Brands reported results for the second quarter last week.

Revenues - though down 4% year over year - beat expectations at $833 million.

Analysts had been expecting $823.2 million, according to Reuters.

Furthermore, the company said it was looking to cut about $60 million in annual costs by shifting around operations. This was the point that encouraged Imperial's analysts the most.

"We expect Chiquita to benefit from a lower cost structure - including an additional $60 million in annual cost savings slated to be completed by the end of the third quarter of 2012, potentially saving $8 million in the fourth quarter of 2012; initiatives to improve quality and execution, plus higher volumes in its salads business, just as a new [chief executive officer] is likely to be announced... Further cost reductions, volume growth initiatives, and a newly appointed CEO should lead to a significant recovery in profitability in 2013 that will likely drive bond and share prices higher, in our view," Imperial said in its report out Wednesday.

Still, net profit was lower at $6 million, or 12 cents per share, versus $78 million, or $1.68 per share, the year before.

Analysts were expecting a gain of 36 cents per share.

Intel, Sandisk soften

Intel and Sandisk were declining during the midweek session ahead of earnings from sector rival Cisco.

Intel's 2.95% convertible notes due 2015 slipped to 114.25, while the 3.25% convertible notes due 2039 lost almost a point to 134.75.

That was versus a stock price of $26.27, which was down 7 cents.

Sandisk's 1% convertible notes due 2013 fell a touch to end around 99.

The equity, however, was up $1.03, or 2.54%, to $41.56 on Wednesday.

After the bell on Wednesday, Cisco Systems reported an "unusually strong quarter," posting net income of $2.5 billion, or 47 cents per share.

That was a 15% increase year over year. Analysts had expected earnings of 45 cents per share.

Revenues were also up, gaining 4% to $11.7 billion.

The company said its financial gains were due to particularly good results out of Asia and Europe.

Mentioned in this article:

Chiquita Brands International Inc. NYSE: CQB

Intel Corp. Nasdaq: INTC

Sandisk Corp. Nasdaq: SNDK

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