Morning Commentary: Fortive, j2 Global convertibles eyed; Microchip active post-earnings

By Abigail W. Adams

Portland, Me., May 8 – There was an uptick in activity in the convertible secondary space on Wednesday as equity markets showed signs of stabilization following brutal declines on Monday and Tuesday.

Fortive Corp.’s 0.875% convertible notes due 2022 were trading down in high-volume activity with stock off slightly following an analyst downgrade.

The 0.875% convertible notes were changing hands around 103.75, according to a market source. There was more than $11 million in reported volume about one hour into Wednesday’s session.

Fortive stock was $82.58, a decrease of 1.08%, shortly before 11 a.m. ET.

The industrial conglomerate’s stock was downgraded to “equal weight” from “overweight” by Morgan Stanley on Wednesday.

j2 Global Inc.’s 3.25% convertible notes due 2029 also saw high-volume activity early in Wednesday’s session with the notes gaining outright alongside stock following an earnings beat.

The 3.25% convertible notes rose about 2 points outright to 136.625, according to a market source.

The notes also saw more than $11 million on the tape about one hour into Wednesday’s session.

j2 Global stock was $86.83, an increase of 1.53%, shortly before 11 a.m. ET.

The cloud services company reported earnings per share of $1.40 versus analyst expectations for earnings per share of $1.32.

Revenue was $304.5 million versus analyst expectations for revenue of $296 million.

Microchip Technology Inc.’s 1.625% convertible notes due 2025 were again active early in Wednesday’s session with the notes moving lower alongside stock after a mixed earnings report.

The 1.625% convertible notes due 2025 dropped about 6.5 points outright to 180. There was about $4 million on the tape early in the session, according to a market source.

While down to as low as $88.52 pre-market, Microchip stock pared its losses as the session progressed and was $93.11, a decrease of 1.1%, shortly before 11 a.m. ET.

While the chipmaker beat on the bottom line with earnings per share of $1.48 versus analyst expectations for earnings per share of $1.39, it missed slightly on its top line.

Microchip reported revenue of $1.329 billion versus analyst expectations for revenue of $1.337 billion.

However, stock was trading down on weak guidance. Microchip projected earnings per share of $1.38 for the current quarter; analysts were expecting earnings per share of $1.56.

The low guidance was due to continued tensions between China and the United States, Investor’s Business Daily reported.

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