Tesla’s convertibles strengthen; Hologic cuts guidance, bonds weaken; Stericycle rises

By Stephanie N. Rotondo

Seattle, Aug. 3 – Tesla Inc. was the nom du jour in the convertible bond market on Thursday as the market reacted to the company’s latest earnings release.

The Palo Alto, Calif.-based automaker announced the results – posting a narrower-than-expected loss – after the market closed on Wednesday. The convertibles had started to push up ahead of the release, a trend that continued into Thursday’s session.

In other earnings news, Hologic Inc.’s 2% convertible notes due 2042 were under pressure, as was its equity. The weakness came despite the fact that the company beat estimates.

However, the Marlborough, Mass.-based manufacturer of medical imaging systems and surgical products did cut its revenue guidance for the year.

Meanwhile, Stericycle Inc.’s 5.25% series A mandatory convertible preferred stock (Nasdaq: SRCLP) popped ahead of the company’s own earnings release, which came after the market closed on Thursday.

The company posted an increase in revenue, though a proposed class action lawsuit settlement resulted in a swing to a loss.

Tesla remains strong

Tesla’s convertibles were trading in good volume on Thursday in the wake of better-than-expected earnings.

A market source saw the 2.375% convertible notes due 2022 rising to a 123 to 124 context, which compared to levels around 119 at Wednesday’s close. The 0.25% convertible notes due 2019 were meantime about 4 points higher around 112.5 versus the 108 to 108.125 range in midweek trading.

And, the 0.5% convertible notes due 2021 ticked up to close near 114.5. The paper had traded with a 110 handle on Wednesday.

As for the company’s stock, it was also on the rise, gaining $21.20, or 6.51%, to close at $347.09.

For the second quarter, Tesla’s net loss was $336 million, or $2.04 per share. That compared to a loss of $293 million, or $2.09 a share, the year before.

On an adjusted basis, earnings per share came to $1.33.

Revenue was $2.79 billion.

Analysts polled by Thomson Reuters had forecast adjusted EPS of $1.82 on revenue of $2.51 billion.

The company also said it had more than $3 billion in cash at the end of the quarter.

Additionally, Model 3 production is expected to hit previously announced targets.

Hologic falls

Hologic’s 2% convertibles took a tumble on Thursday, despite an earnings beat.

At one desk, the notes were seen around 131.325, a loss of about 9 points. At another desk, the paper was pegged at 131.25, also deemed off about 9 points.

The underlying shares meantime waned $3.76, or 8.61%, to $39.91.

For the fiscal third quarter, Hologic reported net income of $59.5 million, or 21 cents per share. That was down about 30% from the previous year.

On an adjusted basis, earnings per share was 50 cents, off 1.9% year over year.

Revenue improved 12.4% to $806.1 million.

Zacks Consensus Estimate was for adjusted EPS of 49 cents on revenue of $799 million.

At the end of the quarter, the company had cash and equivalents of $588.4 million, down from $1.13 billion the previous quarter.

Additionally, the company lowered its revenue guidance for the fiscal year. The company now anticipates revenue yearly of $3.04 billion to $3.05 billion. That compares to its earlier forecast of $3.05 billion to $3.08 billion.

However, annual adjusted EPS was upwardly revised – at least on the low end – to $2.00 to $2.02 a share from $1.98 to $2.02 a share.

Stericycle up

Stericycle’s 5.25% mandatory convertible preferred stock traded higher on Thursday as investors waited for the company’s post-close earnings release.

The preferreds firmed $4.05, or 6.4%, to $67.33.

The company’s stock was also higher, moving up $6.74, or 8.87%, to $82.76.

The Lake Forest, Ill.-based regulated waste disposal company saw revenue grow 2.9% to $917.7 million, even after including a 1.3% unfavorable impact from foreign exchange. Gross profit also firmed, rising 1.1% to $381.8 million.

However, the company swung to a loss for the second quarter, due to a proposed settlement in regards to a class action lawsuit.

Net loss was $148.8 million, or $1.74 a share. On an adjusted basis, earnings per share came to $1.15.

For the same quarter of 2016, the company had reported net income of $37.3 million, or 43 cents per share. On an adjusted basis, EPS was $1.18.

Sutherland adds to calendar

Sutherland Asset Management Corp. announced a $100 million underwritten public offering of $25-par convertible senior notes due 2023 after the close on Thursday.

Price talk is for a 6.75% to 7% yield, according to a market source. The conversion price is expected to be $16.67 a share, equal to a 13% premium over Thursday’s closing share price of $14.75.

Keefe Bruyette & Woods Inc. and JPM Securities LLC are the joint bookrunners. Compass Point Research & Trading LLC is the co-manager.

The convertibles become callable after Aug. 15, 2021. Holders can convert the paper prior to Feb. 15, 2023 in certain circumstances, including if the stock hits a 120% price hurdle or upon a fundamental change.

The notes will be listed on the New York Stock Exchange.

Proceeds will be used to originate or acquire additional mortgage loans and mortgage-related assets consistent with its investment strategy and for general corporate purposes.

Sutherland is a New York-based real estate investment trust.

Mentioned in this article:

Hologic Inc. Nasdaq: HOLX

Stericycle Inc. Nasdaq: SRCL

Sutherland Asset Management Corp. NYSE: SLD

Tesla Inc. Nasdaq: TSLA

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