ServiceNow, Teradyne gain post-earnings; DISH slides on Verizon-Charter chatter; supply eyed

By Stephanie N. Rotondo

Seattle, Jan. 26 – Fresh earnings were pushing around convertible bonds in early Thursday dealings.

ServiceNow Inc. released results late Wednesday, beating revenue estimates but trailing on a per-share basis. Still, the company’s 0% convertible notes due 2018 – as well as the underlying equity – firmed as management raised its first-quarter guidance.

The convertibles were up nearly 5 points at mid-morning, though they finished up 3 to 4 points.

The company’s shares meantime popped nearly 4% on the day.

Teradyne Inc. also came out with earnings, swinging to a profit from the previous year.

The results also beat analysts’ expectations.

In response, the 1.25% convertible notes due 2023 ticked up almost 3 points in early dealings, ending 2 to 2.5 points better.

The common stock finished better as well, though down from the day’s highs.

Aside from earnings-driven names, DISH Network Corp.’s convertible debt declined about 5 points on the day, after it was rumored that Verizon was making a play for Liberty Media Corp.’s Charter Communications Inc.

DISH had previously been considered a potential partner for Verizon.

After the market closes, three deals were expected to price, including one announced early Thursday from TPG Specialty Lending Inc.

The company is offering $100 million of convertible senior notes due 2022, with price talk for a yield of 4.25% to 4.5% and an initial conversion premium of 15%.

BofA Merrill Lynch and Morgan Stanley & Co. LLC are running the books.

Also on tap were deals from Horizon Global Corp. and Virtus Investment Partners Inc.

Pricing details were not available as of press time.

ServiceNow gains

ServiceNow’s 0% convertibles were boosted Thursday after the company reported earnings and announced guidance for the first quarter and fiscal 2017.

A market source saw the issue hitting a high of 135.625, though the paper ended closer to a 132.25 to 133.25 range.

The source said that was up 3 to 4 points day over day.

At mid-morning, the convertibles were trading at 133.25, according to a market source.

The equity closed up $3.12, or 3.61%, at $89.48. While that was better for the day, the shares were up $4.17, or 4.83%, at $90.53.

For the fourth quarter, the Santa Clara, Calif.-based cloud computing company reported earnings per share of 24 cents.

On an adjusted basis, the company posted a loss per share of 15 cents – worse than the 10-cent loss forecast by Zacks Consensus Estimate.

Still, revenues of $385.7 million – up 35% from the previous year – were better than the expected $379 million.

For the first quarter, total revenue is expected to be between $406 million to $411 million, which equates to growth of 33% to 34% year over year.

Annual revenue is meantime slated to be between $1.82 billion to $1.85 billion, representing a 31% to 35% increase.

Teradyne beats

Teradyne’s fourth-quarter results beat expectations, resulting in gains for the convertibles.

The 1.25% convertibles ended the session near 11.5, up 2 to 2.5 points, a source reported.

The source also noted that the paper hit a high of 113.375.

At mid-morning, the convertibles were trading with a 113 handle.

The company’s common shares improved 37 cents, or 1.36%, to $27.57. The stock was up $1.24, or 4.56%, at $28.44 in earlier dealings.

The North Reading, Mass.-based developer and supplier of automatic test equipment posted net income of $66.3 million for the quarter, or earnings per share of 33 cents.

Adjusted EPS was 32 cents.

The company reported a loss the year before.

Revenue came to $380 million.

Zacks had forecast EPS of 21 cents on revenue of $345.3 million.

For the full year, Teradyne reported a $43.4 million loss, or 21 cents per share. Revenue was $1.75 billion.

In the prior year, the company posted a profit.

For the current quarter, Teradyne said it expects to see revenue of $420 million to $450 million, with EPS of 33 cents to 40 cents.

DISH slides

DISH Network’s 3.375% convertible notes due 2026 took a hit on Thursday after it was reported that Verizon might be making a play for Liberty Media’s Charter Communications.

DISH had previously been talked as the match-up for Verizon.

One sellside source said the bonds dropped 5.5 points to 114.875. Another saw the debt closing just south of 115, which compared to levels near 117 at the open.

The paper was around 120 as of Wednesday’s close.

Earlier in the day, the convertibles were seen off over 4.5 points at 115.875.

The common stock also got smacked, falling $4.21, or 6.77%, to $58.02.

The Wall Street Journal reported that Verizon’s Lowell McAdam, chief executive officer, had approached Liberty’s CEO, Greg Maffei, about a possible tie-up with Charter. Verizon is said to have looked at 10 other options.

The sources cited in the article said that so far, no official talks have begun.

Still, if Verizon and Charter do in fact move forward with a merger, then that could leave DISH with little to no prospects.

Mentioned in this article:

DISH Network Corp. Nasdaq: DISH

Horizon Global Corp. NYSE: HZN

ServiceNow Inc. NYSE: NOW

Teradyne Inc. NYSE: TER

TPG Specialty Lending Inc. NYSE: TSLX

Virtus Investment Partners Inc. Nasdaq: VRTS

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