Midday Commentary: Chemed down outright, expands on hedge; Volcano drops in line with shares

By Rebecca Melvin

New York, Oct. 29 - Earnings news and guidance spurred trading action in a couple of convertible bonds early Tuesday with flat to improved results, market players said.

Chemed Corp.'s third-quarter earnings beat estimates, but revenue missed estimates, and the Cincinnati-based hospice operator guided full-year 2013 earnings below estimates. Adjusted earnings increased 6.3% to $1.36 per share while revenue decreased 3.8% to $341 million.

Looking ahead, Chemed said that revenue will be constrained in the fourth quarter due to a shift in its services provided away from high acuity care to routine home care.

Chemed's 1.875% convertibles due 2014 fell outright but expanded on a dollar-neutral, or hedged, basis by about 0.5 point. The bonds were seen at 101.625 versus an underlying share price of $64.75.

Volcano Corp. provided updated guidance on its third-quarter results, which it will report Nov. 4, with the San Diego-based medical-device maker lowering its full-year revenue forecast to $391 million to $395 million, from a previous range of $394 million to $400 million.

Volcano's 1.75% convertibles due 2017 were seen around 97.375 versus an underlying share price of $20.45.

"The bonds nuked straight down," a New York-based trader said, referring to a move lower in line with a 14% drop in the underlying shares.

A second trader put the level at 97.75 versus an underlying share price of $20.00.

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