By Rebecca Melvin
New York, April 22 – U.S. convertibles traded lightly on Friday amid a crop of mixed earnings reports, but convertibles paper was mostly better and definitely better on the week, market sources said.
Proofpoint Inc., the Sunnyvale, Calif.-based internet security services vendor, traded up on both an outright and a dollar-neutral basis, after posting stellar quarterly results, in which earnings and revenue beat estimates. It also guided current quarter revenue higher as well as raised full-year earnings and revenue estimates.
Proofpoint was about 0.625 point better on swap, a New York-based trader said.
Volume was “pretty light,” he added. Some names associated with earnings reports didn’t trade, but in general, everything was higher for the week, he said.
Southwestern Energy Co. traded better after earnings. Its mandatory convertible preferred shares were up 15 to 20 cents on swap after quarterly earnings beat expectations, the trader said.
Unisys Corp.’s 5.5% convertibles due 2021, which priced last month, were indicated up by about 5 points on an outright basis after the Blue Bell, Pa.-based information technology company reported a narrower loss for the quarter that was better than expected. Revenue for its first quarter was 8% lower compared to the year-earlier period, but also better than expected.
Meanwhile, Trinity Industries Inc.’s 3.875% convertibles due 2036 traded at 110.1, which was up from 108 previously. But the paper fell short of indications at 111, based on a jump in the common shares of the Dallas-based industrial manufacturing company to $19.93, which was higher by $1.35, or 7%.
Trinity Industries reported first-quarter profit of $97.2 million, or 64 cents a shares. Adjusted earnings were 61 cents per share, which missed estimates. Revenue was $1.19 billion, which also missed estimates for revenue of $1.33 billion.
Crown Castle International Corp. also reported earnings that missed estimates, but its common stock was up $1.86, or 2.2% to $87.75. The Crown Castle 4.5% mandatory convertible, which matures later this year, “doesn’t trade,” a New York-based trader said.
The Houston-based operator and lessor of wireless towers and other infrastructure raised $1.5 billion in a two-part offering of senior notes at the end of January. The notes are due 2021 and 2026 and have an interest rate of 3.4% per annum and 4.45% per annum, respectively.
Proofpoint gains on swap
Proofpoint’s 1.25% convertibles traded up to 151.75 versus an underlying share price of $55.81, a trader said.
Previously the convertibles were at about 146. The gain represented a 0.625 point expansion on a hedged basis versus the underlying shares, which were up several percentage points at late morning, and ended even higher, up $3.09, or 5.8%, to $56.78 on the Nasdaq stock exchange.
“That company, a small company, is starting to break through,” the trader said.
Proofpoint reported revenue of $79 million for the first quarter, which was up 37% compared to the year-earlier period. But the company lost 9 cents per share for the period, compared to a 14-cent loss in the year-earlier quarter. Billings came in at $98.3 million, up 48%.
Looking ahead, Proofpoint expects sales of $83.5 million to $84.5 million for the current quarter and $94 million to $96 million in billings, which is up 32% and 26%, respectively.
Proofpoint’s billings guidance was a little below estimates for $100 million.
Southwestern Energy trades up
Southwestern Energy’s mandatory convertible preferred shares due 2018 traded up $3.26, or nearly 13%, to $29.00. Southwestern Energy shares gained $1.60, or 15%, at $12.27 in active trade.
The company swung to a quarterly loss that was narrower than expected. It reported a first-quarter loss of $1.13 billion, or 30 cents per share. Adjusted losses were 8 cents per share. Revenue was $579 million for the quarter, which was better than expected.
A trader said that the company beat estimates by 13 to 14 cents.
“It also had kind of higher revenue and looks like the forward curve on gas pricing is favorable for them,” the trader added.
Mentioned in this article:
Crown Castle International Corp. NYSE: CCI
Proofpoint Inc. Nasdaq: PFPT
Southwestern Energy Co. NYSE: SWN
| Southwestern Energy Co. mandatory: | NYSE: SWNC
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| Trinity Industries Inc. | NYSE: TRN
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| Unisys Corp. | NYSE: UIS
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