Chart Industries adds on hedge after earnings miss; MGM active; primary market quiet

By Rebecca Melvin

New York, April 29 - Chart Industries Inc.'s convertibles were trading actively in the convertibles market Tuesday and improved on a dollar-neutral basis after the Garfield, Ohio-based engineering, procurement and construction company missed earnings estimates and the stock slid 13%, market players said.

MGM Resorts International was also somewhat busy after earnings as the Las Vegas-based casino operator reported earnings that sent its stock up 8.5%, a New York-based trader said.

Elsewhere, DDR Corp. was said to be a focus of convertibles players as shares of the Ohio-based shopping mall real estate investment trust wavered between gains and losses.

Allegheny Technologies Inc.'s convertibles were under selling pressure even as shares added nearly 2%, a New York-based trader said.

Hedge fund sellers pushed the Allegheny bonds a "tiny bit lower" to between 101.625 to 102.125, the trader said.

Salesforce.com Inc.'s 0.25% convertibles due 2018 looked to be lower with the shares off fractionally, although traders queried hadn't traded the bonds. The 0.25% convertibles were shown to have printed on Trace data at between 108.25 and 108.75 in the early going, which was down from about 111.75 to 112.25 on Monday. By the end of the session the stock had come back for a 3% gain and the convertibles printed at 110.

Otherwise the convertibles market was very quiet, traders said.

"There's' not a lot of catalysts and vol. is really low," a New York-based trader said.

The primary market remained quiet for a second straight day this week.

Equities ended solidly higher with the Nasdaq stock market adding 29.14 points, or 0.7%, to 4,103.54. The Dow Jones industrial average and the S&P 500 stock index both tacked on 0.5% gains.

The market is experiencing a bit of "complacency" right now, a New York-based trader said. Other than the recent hit taken by some growth stocks and China names, the markets have been looking at smooth sailing as monetary policy and the economic outlook appear clear.

Chart adds on hedge

Chart's 2% convertibles due 2018 were seen a point better on a dollar-neutral, or hedged, basis versus the underlying shares, a New York-based trader said.

Early in the session, the bonds were quoted at 124.1875 bid, 124.6875 offered with the underlying shares at $69.00. That was up 0.75 point delta neutral, a trader said.

Later in the session, the Chart convertibles were quoted at 121.875 bid, 122.375 offered versus an underlying share price of $67.00.

Chart shares ended the session down $3.16, or 4.3%, at $70.72. During the session they fell to as low as $64.05.

The name was a primary focus of convertibles players on Tuesday after the company reported first-quarter net income that fell 23% to $12 million, or $0.41 per share on an adjusted basis, and missed expectations for a $0.66 per share result.

Revenue fell 2.7% to $266.2 million, which was below estimates for a $300.4 million top line.

In addition the company lowered its full-year earnings guidance to $3.00 per share to $3.40 per share, which was off by a dime from prior guidance.

The company said that weakness in its biomedical respiratory business and delays in liquefied natural gas projects were behind the shortfalls.

"I think they were about a point better," a trader said of the Chart convertible bonds.

Mentioned in this article:

Allegheny Technologies Inc. NYSE: ATI

Chart Industries Inc. Nasdaq: GTLS

DDR Corp. NYSE: DDR

MGM Resorts International NYSE: MMR

Salesforce.com Inc. NYSE: CRM

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