Preferreds start strong as investors eye Israel, Russia; BB&T results miss; Verizon active

By Stephanie N. Rotondo

Phoenix, July 21 – Preferred stocks were firm as the week began Monday, but trading was on the subdued side, according to one trader.

“Everyone is still focused on what’s going on in Israel,” he said, noting that the market was also waiting to see what sort of sanctions might be slapped on Russia in the wake of the Malaysian Airlines crash last week.

Findings have indicated that the plane was taken down by a missile believed to be fired by pro-Russian separatists in the Ukraine.

The Wells Fargo Hybrid and Preferred Securities index closed up 2 basis points after being up as much as 18 bps at mid-morning.

The index came down from near its intra-day highs in the final minutes of the trading day.

The primary market wasn’t pushing out any deals Monday, and a trader said he had not heard of any offerings set to launch. Still, as corporate earnings continue to roll out, the pipeline isn’t expected to be closed entirely.

BB&T Corp. put out earnings on Monday. Unlike many other banks, the company’s profit and revenues missed analysts’ projections and the company’s preferreds finished the day mostly weaker.

Verizon Communications Inc. is meantime slated to bring its quarterly results on Tuesday. Lowell McAdam, chairman and chief executive officer of the telecommunications company, said at the Allen & Co. conference in Sun Valley, Idaho, that the quarter is expected to show continued growth.

BB&T ends lower

BB&T’s preferred stock ended the session with a weak tone after reporting earnings that missed estimates.

The (NYSE: BBTPG) series G preferreds closed down 8 cents at $22.32. But the (NYSE: BBTPE) series E securities managed to eke out some gains, closing up 13 cents at $23.75.

Liquidity in the structure as a whole, however, was muted.

For the second quarter, the Winston-Salem, N.C.-based bank reported net income of $425 million, or 58 cents per share, a 22% decline year over year. Excluding certain items, profit was 70 cents per share.

Analysts polled by Bloomberg were expecting an average of 75 cents per share.

Profit was weighed on by a 3.7% increase in expenses due to a planned governmental audit of the company’s government-backed loan sales.

Expenses came to $1.55 billion.

The company also noted that mortgage and tax-related adjustments pressured the bottom line.

And, revenue dropped 7.5% to $2.31 billion due to a decline in mortgage-banking income.

Verizon busy, soft

Verizon Communications will report its second-quarter results on Tuesday.

The results are expected to show retail postpaid subscriber growth of over 1.4 million, according to McAdams at the Allen & Co. conference on Tuesday.

But while McAdams was optimistic about the earnings release, Verizon’s 5.9% $25-par notes due 2054 (NYSE: VZA) were weaker on the day.

The notes fell 6 cents to $25.93. The securities were on the active side for an otherwise quiet day.

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