AK Steel bonds down despite earnings beat; Freeport falls on wider loss; Consol Energy trades mixed

By Stephanie N. Rotondo

Seattle, April 26 – A round of fresh earnings was helping move distressed bonds around on Tuesday, even as overall liquidity was muted.

Investors are sitting on the sidelines waiting to see what the Federal Reserve will say in its two-day policy meeting that began Tuesday. The meeting concludes Wednesday, with a press conference scheduled thereafter.

AK Steel Holdings Corp. came out with its first-quarter results on Tuesday, showing a considerably narrower loss that beat expectations.

However, the market did not appear to react positively to the news, as the bonds finished the day with a weaker tone.

Also down on the day was Freeport-McMoran Inc., which saw its quarterly net loss nearly double year over year.

Consol Energy Inc. meantime swung to a loss for its first quarter. Those bonds ended the session mixed.

On the upside, Teck Resources Ltd. posted a surprise profit for the quarter, due in part to a strong U.S. dollar – which the company uses to sell its goods – and a weak Canadian dollar – which the company uses for expense purposes.

That debt ticked up after the results.

Looking ahead, Intelsat SA is scheduled to release its first-quarter earnings on Thursday.

In Tuesday trading, a trader saw the 7¼% notes due 2020 falling 1½ points to 71.

AK results improve

AK Steel’s net loss narrowed considerably year over year, to $13.6 million, or 8 cents per share, from $306.3 million, or $1.72 per share.

The prior year’s results included a charge of $1.44 per share related to an investment in now-bankrupt Magnetation LLC.

Analysts polled by Thomson Reuters had forecast a loss of 10 cents per share.

Investors were nonplussed by the news and weighed down the bonds.

A trader said the 7 5/8% notes due 2020 ended off a point at 79½. Another market source, however, called the issue down nearly 6 points at 79¾ bid.

While the bottom line was much improved, revenue weakness continued as prices and shipments declined.

Revenue fell 13% to $1.52 billion – still better than the $1.51 billion predicted by analysts.

Shipments were down 5% to about 1.66 million tons, which compared to 1.75 million tons the year before. The average selling price declined to $914 a ton from $999 a ton.

Freeport sees wider loss

A much wider loss and word of a workforce reduction resulted in weakness in Freeport-McMoran’s bonds on Tuesday.

A trader saw the 3.55% notes due 2022 losing a point to close at 79½. The 4.55% notes due 2024 slipped almost half a point to 78 3/8.

The 3 7/8% notes due 2023 held steady at 78½, the trader said.

For the first quarter, the Phoenix-based metals and mining company reported a loss of $.18 billion, or $3.35 per share. That compared to a loss of $2.47 billion, or $2.38 per share, the previous year.

On an adjusted basis, however, the loss amounted to just 16 cents per shares. Analysts polled by Zacks Investment Research had forecast a loss of 20 cents per share.

Revenue came to $3.53 billion, down from $4.15 billion.

According to Zacks’ analyst poll, revenue expectations were $3.67 billion.

Freeport also said that it was planning to slash its oil and gas workforce by 25%. The company is also continuing to explore sale options for certain assets.

Consol mixed post-earnings

Coal and natural gas producer Consol Energy swung to the red in the first quarter, after posting a profit for the year-earlier period.

The company’s debt, however, ended mixed for the day.

One trader said the 8% notes due 2023 declined 1½ points to 84¼. Another market source also placed the issue at that level, though it deemed it off 1¾ points.

The first trader also saw the 5 7/8% notes due 2022 rising half a point to 82½.

Consol posted a loss of $97.6 million, or 43 cents per share. In the first quarter of 2015, the company reported a profit of $79 million, or 34 cents per share.

Adjusted EBITDA declined to $176 million from $242 million.

Revenue was also weaker at $558.5 million, compared to $792.6 million. Natural gas revenue fell 19% for the quarter, while coal dropped 39.5%.

The good news was that the company’s liquidity improved to $1.3 billion, due in large part to the recent $460 million sale of its Buchanan mine in Virginia. Consol used proceeds to pay down $400 million of its revolving credit facility on April 1, bringing total debt reduction levels in the first quarter to $445 million.

Teck profit beats estimates

A surprise profit helped to give Teck Resources’ bonds a small boost on Tuesday.

“They had pretty good numbers, got a beat,” a trader said.

He saw the 6 1/8% notes due 2035 rising a point to 72¼.

The Canadian diversified mining company said Tuesday that it had a profit of C$94 million, or 16 Canadian cents per share, in the first quarter. That compared to a profit of C$68 million, or 12 Canadian cents per share, the year before.

On an adjusted basis, the company had EPS of 2 Canadian cents per share. Analysts had forecast a loss of 3 Canadian cents.

However, revenue decreased 16% to C$1.7 billion. Analysts were expecting C$1.73 billion.

The company’s debt also increased year over year to C$6.97 billion from C$6.96 billion.

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