SunPower surges higher; Radian adds 0.25 point; Hutchinson gains 2-3 points for the week

By Rebecca Melvin

New York, Feb. 18 - SunPower Corp.'s 4.75% convertibles jumped Friday in tandem with the common stock of the San Jose, Calif.-based solar company, which released better-than-expected quarterly earnings and raised first-quarter 2011 and full-year guidance after the market close Thursday.

Radian Group Inc.'s convertibles were lower outright, but about 0.25 point better in terms of premium, as shares of the Philadelphia-based mortgage insurer continued to drop back from a big pop last week.

Hutchinson Technology Inc. notched 2 to 3 points of gains for the week, although they were quieter on Friday, the day before the long holiday weekend for Presidents Day. Financial markets are closed Monday.

Western Refining Inc.'s convertibles looked to have been unsuccessful in holding premium as shares of the El Paso, Texas-based independent oil refiner dropped sharply on Friday, according to a New York-based sellside analyst.

Owens-Illinois Inc.'s 3% convertibles due 2015 traded at 103.5 versus a share price of $31.30 on Friday, which compared to a price of 103 versus a share price of $30.83 on Monday, according to Citigroup convertibles commentary. That paper trades on about a 39% delta.

The week ended on a quiet note as market players turned their focus to the upcoming holiday weekend after a flurry of transactions early in the day related to earnings and other factors.

SunPower surges again

SunPower's 4.75% convertibles due 2014 traded at 109 versus a share price of $19.22 on Friday, compared to Wednesday's 103 versus a share price of $17.07. That compares to 94.75 bid, 95.75 offered, versus a share price of $13.75 on Feb. 11, according to a Connecticut-based sellside analyst.

The SunPower 4.75% convertibles and the 4.5% convertibles are the most equity sensitive of the solar company's different convertible bonds, according to one Connecticut-based sellside trader, who tracks them both on about a 65% delta.

But a New York-based sellside analyst called it slightly differently, putting the delta on the SunPower 4.75% convertibles at 50.2% and the delta on the 4.5% SunPower convertibles at 57.26%.

Shares of the San Jose, Calif.-based solar panel maker surged as much as 14% in early trading, but settled back to 3.5% higher by the end of the session at $18.04.

The SunPower shares have had a meteoric move up since August when they were just $10. And the SunPower 4.75% convertibles were in the 70s a few months ago.

SunPower also has 4.5% convertibles due 2014, 0.75% convertibles due 2027 and 1.25% convertibles due 2027. But those issues weren't heard in trade.

SunPower outpaces estimates

For the current quarter, SunPower is estimating non-GAAP earnings of 15 cents per share to 21 cents per share on revenue of $475 million to $525 million. That compares to the analysts' estimate of 16 cents per share earnings on revenue of $487 million.

For the full year, SunPower forecasts non-GAAP earnings of $2.00 per share to $2.20 per share on revenue of $2.8 billion to $2.95 billion. That compares to the estimate of $1.87 in earnings per share on revenue of $2.77 billion.

SunPower also reported stellar fourth-quarter earnings of $143.4 million, or $1.36 per share, on revenue of $937 million in the fourth quarter. The consensus estimate was for earnings of $1.05 per share on revenue of $931 million.

SunPower projects strong project revenue from the United States and Italy in 2011 and noted that 50% of its Italian projects are scheduled for construction by September 2011.

Although there are fears that changes are afoot in the structuring of Italian solar policy, SunPower remained confident that Italy will be a very strong market for 2011.

The Italian government is expected to announce policy changes related to ground-based solar projects as early as next week, although it may also grandfather existing projects.

Radian slightly better

Radian's 3% convertible senior notes due 2017 traded at 96.5 versus a share price of $7.35 on Friday, which compared to 99.75 versus a share price of $7.85 on Wednesday, according to a New York-based sellside desk analyst.

Shares of the Philadelphia-based mortgage insurer closed down 12 cents, or 1.5%, at $7.39.

The convertibles were "actually 'out' by about 0.25 point and are now about 33.6 points [over parity] versus about 33.3 points yesterday," a New York-based sellside desk analyst said.

The stock and bonds have been weighed down by larger-than-expected losses reported by itself and its competitors such as PMI Group Inc. earlier this week.

But the stock and bonds also saw a pop last week after word that the Obama administration proposes reducing the role of government-backed entities in the mortgage market, including the shut down of Fannie Mae and Freddie Mac.

New Hutchinson jumps

Hutchinson Technology's 8.5% convertibles due 2026 were quoted at about 91 on Friday, which was up from 83 bid, 84 offered on Monday.

The older Hutchinson 3.25% convertibles due 2026 were seen at 83, compared to 82.5 earlier in the week.

The 8.5% convertibles, initially issued last week as part of an exchange offer, were said to have expanded 2 points to 3 points this week, according to a Connecticut-based sellside trader.

"They have moved up all week long to the tune of 2 points," a New York-based sellside trader said before the open Friday.

The paper was also trading in good volume before Friday, market sources said.

Hutchinson is based in Hutchinson, Minn., and makes suspension assemblies for disk drives.

Mentioned in this article:

Hutchinson Technology Inc. Nasdaq: HTCH

Owens-Illinois Inc. NYSE: OI

Radian Group Inc. NYSE: RDN

SunPower Corp. Nasdaq: SPWRA

Western Refining Inc. NYSE: WNR

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