Hologic, Symantec, National Retail trade mixed on earnings; CIT gains; ProLogis prices

By Rebecca Melvin

New York, May 1 - The convertibles of Hologic Inc. dropped along with their underlying shares Thursday after the Bedford, Mass.-based medical technologies company reported earnings that missed estimates and offered lukewarm guidance, traders said.

Hologic's fairly liquid convertibles were lower by a point, dollar neutral, a Connecticut-based sellsider said, adding that the hedge had been 70% and was now 65%.

Another trader said: they "nuked down on about a 70 which was neutral ... no real expansion on the day."

Earnings news kept many convertibles players busy again Thursday as the reporting season continued: Symantec Corp. reported late Wednesday and was higher in trade, and National Retail Properties Inc., which reported early Thursday, traded flat on numbers that beat expectations.

"A lot more are meeting, than beating; and the ones that miss are just getting pummeled," a Connecticut-based sellside analyst said of company earnings reports.

The convertible preferred shares of CIT Group Inc. gained in active trade amid takeover rumors, a sellside trader said. But the existing convertibles of ProLogis were under pressure ahead of that industrial real estate investment trust's expected pricing of an upsized $500 million of new convertibles after the close.

In fact, that issue price toward the cheap end of talk for a coupon of 2.625% and an initial conversion premium of 21.25%.

Hologic credit looks logical

Hologic's 2% convertibles gave up Wednesday's 0.25 point to 0.50 point expansion after the medical technologies company reported disappointing earnings that punished the stock, but the "premium is out a little bit, and people take comfort from that," a West Coast-based sellside trader said.

The convertibles were at about 87 bid, 89 offered versus a stock price of $23.00, compared to a market at right about par or a little under versus a stock price of $29.90 on Wednesday.

"It looks like the credit is holding in there, compared to the stock on a 65% hedge - it used to be 70%. One would think you'd do well," a Connecticut-based sellside analyst said.

"It seems like they met their numbers on an adjusted basis, but there was no response to that," he said.

"The quarter wasn't bad, but management did provide sort of lukewarm guidance for the third quarter and fiscal year," a New York-based sellside desk analyst said.

Hologic, which concentrates on women's health diagnostics and surgical products, saw its revenue more than double to $431 million for its second fiscal quarter, from $181 million for the second fiscal quarter a year earlier.

The increase was primarily due to the inclusion of about $189.2 million of revenue from new product lines acquired in the merger of Cytyc Corp. last autumn, the company said.

Net income also more than doubled to $56 million, with the latest results including $25.1 million of charges related to the Cytyc merger. Its total loan balance was reduced to $89.6 million as of March 29.

"They're nuking down initially; but everything seems to be is nuking down initially," a West Coast-based trader said of the 2% convertibles on Thursday.

It's a pretty good credit, with the debt on the books, and people think that it'll expand back out over time. As far as comparables, people equate them to Savvis and Arris."

Hologic 2% convertibles due Dec. 15, 2037 were seen closing at 88.15 versus a closing stock price of $23.75 on Thursday, compared to a trade at 99.625 versus a stock price of $29.55 on Wednesday.

Hologic shares (Nasdaq: HOLX), which were split two for one on April 3, plunged in extremely heavy volume Thursday, but they closed off their lows, down $5.44, or 18.5%, at $23.75.

Symantec adds on earnings, outlook

The convertibles of Symantec gained about 7 points outright after the security software maker said profit tripled and its outlook topped expectations as it kept control on spending. But trading in the convertibles wasn't seen as terribly active.

"We changed from one account to another," a New York-based sellside analyst said when asked about action in Symantec.

The Symantec 0.75% convertibles due June 2011 traded at 114.5 versus a share price of $19.34 on Thursday, compared with trades at 107.5 versus a share price of $17.22 on Wednesday.

The Symantec 1% convertibles due June 2013 were seen a little higher at 115.4 Thursday, compared to 108.2 versus a share price of $17.22 on Wednesday.

Shares of the Cupertino, Calif.-based tech company closed up $2.12, or 12.3%, at $19.34.

NNN flat after beating estimates

National Retail Properties' convertibles traded flat after the real estate investment trust reported a 25% jump in first-quarter earnings as a result of higher rental revenue.

Funds from operations rose to $37 million, or 51 cents a share, for the first quarter, up from $29.6 million, or 49 cents a share, for the year-ago period.

Chief executive officer Craig Macnab said in a news release, "This is a great start to what we see as another record year for NNN. Our portfolio and balance sheet are in good shape and the competitive environment for acquisitions is notably better than in recent years."

The National Retail 3.95% convertibles due September 2026 traded at 104.375 versus a share price of $23.375.

Shares of the Orlando. Fla.-based REIT wavered much of the session but closed up 34 cents, or 1.5%, at $23.25.

CIT Group gains

CIT's 8.75% perpetual preferred shares traded up to about 61 versus a share price of $11.99 on Thursday, compared to 54 versus a share price of $10.89 on Wednesday.

The financial sector was better overall on Thursday, but shares of CIT, the New York-based commercial finance company, (NYSE: CIT) jumped $1.10, or 10%, to $11.99.

A Boston-based sellside convertibles trader said the CIT preferreds were "up strongly" amid a takeout story by a couple of brokers. But he added, "We have been saying that for months now."

There appeared to be no other particular news aside from the sector move.

ProLogis' existing convertibles weaker

ProLogis' existing convertibles were under pressure and down about 0.75 point to a point ahead of pricing of a new upsized issue of 2.625% convertibles on Thursday.

The existing 1.875% convertibles due 2037 were at about 96.25 versus a share price of $62.61, and the existing 2.25% convertibles were offered at 100.875.

The new bonds were modeling at fair value assuming a credit spread of about 225 basis points over Libor and a volatility of 27%.

"PLD has had pretty steady performance and is among the more liked REIT names after all this stuff from the last year," a New York-based sellside trader said. It has migrated worldwide and has more international exposure than other REITs and is therefore more protected from weakness in the U.S. economy.

Shares of the Denver-based industrial REIT (NYSE: PLD) were mostly lower through the session but closed up 25 cents, or about half a percentage point, at $62.86.

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