Weatherford pressured by earnings; Akamai firms; NuVasive takes a hit; Dycom up on swap

By Stephanie N. Rotondo

Seattle, Oct. 26 – Earnings news was pushing around convertible paper on Wednesday.

Weatherford International plc’s 5.875% convertible notes due 2021 were “all over the place” in active trading, according to one New York-based sellsider. The volatility in the name came as the company reported a much wider net loss for the third quarter, due largely to after-tax charges.

The equity underlying the debt was down more than 10% in early trading, though it closed off closer to 7%.

Meanwhile, an earnings beat was helping Akamai Technologies Inc.’s 0% convertible notes due 2019 gain ground.

The company saw a nearly 6% increase in revenue for the quarter, helped by growing demand for cloud security products.

NuVasive Inc. was another active name in the wake of earnings. This time, however, the results missed expectations, which put considerable pressure on the company’s 2.25% convertible notes due 2021 and 2.75% convertible notes due 2017.

A trader remarked that Tesla Motors Inc. was slated to release its latest results after the market closed.

“It should be interesting,” he said, adding that ahead of the release, the convertible notes “traded a few times, right in line.”

As for the stock, it was off prior to the numbers, though only slightly. In after-market dealings, the equity rose over 5%, as earnings per share came in well above expectations.

Away from earnings, Peabody Energy Corp. and Chesapeake Energy Corp. continued to be busy. Following Tuesday’s trend, the convertibles remained soft.

Peabody’s 4.75% convertible junior subordinated debentures due 2066 were seen at 18.5.

Another market source placed the issue at 18 at the close, down 6 points outright.

Paper had been as high as 26 on Tuesday, though it ended closer to 19.

Chesapeake’s 5.5% convertible senior notes due 2026 were seen trading just below par at mid-morning. Prior to the open, the bonds had been slightly north of par, according to a trader.

“Chesapeake was active and weaker on swap with oil off,” another trader said. “The bonds have been up every day for the past week.”

For its part, domestic crude oil declined 1.62% to $49.15 a barrel, as concerns about OPEC’s proposed production freeze continue.

Weatherford wanes

Weatherford International’s 5.875% convertible notes were weaker in response to the company’s latest earnings announcement.

A market source placed the issue at 113.5 at the end of the day, which was down 7 points outright.

Another trader said the paper was gyrating, seeing prints at 113.375 against a share price of $5.50 as well as 117.25 versus a share price of $5.92 in early trading.

The trader noted that the paper trades on a 75% delta.

The stock meantime dropped 42 cents, or 6.82%, to $5.74.

For the fiscal second quarter, the Houston-based oilfield services provider posted a net loss of $1.78 billion, or $1.98 per share. That compared to a loss of $170 million or 22 cents per share, the year before.

The larger loss was due to $1.43 billion in after-tax charges. On an adjusted basis, the loss narrowed to $349 million, or 39 cents per share.

Analysts had predicted a loss of 25 cents.

Revenue fell 3% to $1.36 billion. However, revenue from North American operations increased by 12%, even as international revenue slipped 4%.

Akamai pushes higher

A trader said Akamai Technologies’ 0% convertible notes were “active on the back of earnings.”

A source placed the convertibles at 104.39 at the close, a gain of almost 5 points.

Another trader pegged the issue at 104.5 at mid-morning, which compared to 102 at the open.

“The stock is up $7.50,” he added.

The equity eventually ended up $8.63, or 14.61%, at $67.70.

The surge in the convertibles came even as net income for the quarter slipped to $76 million, or 43 cents per share, from $88.04 million, or 49 cents per share. It was the sizable gain in revenue – at $584 million, up from $551 million – that helped the name improve.

NuVasive battered

NuVasive’s convertible bonds took a hit Wednesday as the San Diego-based medical device company reported weaker-than-expected revenue.

The 2.75% convertible notes were down as much as 15 points, according to one source, trading near 144. The 2.25% convertibles were seen at 116, off about 9 points.

The stock was similarly wasted, declining $6.59, or 10.07%, to $58.84.

NuVasive reported adjusted third-quarter earnings of 40 cents per share, which was in line with analysts’ expectations and a gain of over 14% year over year. Revenue was up 19.5% at $239.6 million.

However, analysts had expected revenue to be even better at $243.4 million.

The company also updated its full-year guidance, further spooking investors by reducing revenue forecasts to $952 million from $962 million.

Adjusted full-year profit guidance was unchanged at $1.64 per share.

The downward revision in revenue reflected the fact that the company’s XLIF dilator was off the market in Japan for most of the fourth quarter.

Dycom debt trimmed

A trader said Dycom Industries Inc.’s 0.75% convertible senior notes due 2021 were 7 points weaker outright, but up a point on swap, after Alphabet’s Google Fiber said late Tuesday that it was suspending its internet service in eight cities.

Dycom installs the fiber pipelines for Google. Because of the scale back, it is expected that revenue from Google will decline – a notion that does not sit well, given that Google is one of Dycom’s largest customers.

A market source saw the 0.75% notes closing at 104.7, down about 6 points outright.

The equity underlying the debt was down $12.21, or 14.41%, at $72.50.

The good news is that Dycom still has other customers that are aggressively laying fresh fiber, such as AT&T.

Mentioned in this article:

Akamai Technologies Inc. Nasdaq: AKAM

Dycom Industries Inc. NYSE: DY

NuVasive Inc. Nasdaq: NUVA

Tesla Motors Inc. Nasdaq: TSLA

Weatherford International plc NYSE: WFT

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