Market Overview

Tyco International Earnings Preview: Higher EPS, Flat Revenues Expected

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Tyco International (NYSE: TYC) is scheduled to report fiscal fourth-quarter 2011 results Wednesday, November 16, before the markets open. Tyco is in the process of spinning off some of its businesses to streamline operations, and the company has posted increased profits for three quarters in a row. Investors no doubt will be looking for updates on the split and more earnings growth.

Analysts on average predict that Tyco will report earnings of $0.59 per share for the quarter and $3.18 per share for the fiscal year. That would be 13.9% and 15.7% higher, respectively, from last year. That quarterly EPS estimate is unchanged from 60 days ago, but the full-year estimate is up a penny per share. Note that analysts have underestimated Tyco's earnings in each quarter since the beginning of 2008.

The forecast also calls for the company to post revenues of $4.5 billion for the quarter and $17.1 for the year. Both numbers would be only marginally higher than a year ago. For the current quarter, revenues are so far expected to fall by 2.2% year over year.

The Company

Based in Schaffhausen, Switzerland, Tyco International produces and markets security products and services and other industrial products worldwide. Its segments include Tyco Security Solutions, Tyco Fire Protection, and Tyco Flow Control. This S&P 500 component was founded in 1960 and now has a market cap of $21.4 billion.

During the three months that ended in September, the company announced its plans to split into three different companies. The company also completed its acquisition of fire suppression products maker Chemguard and announced the acquisition of security systems maker Visonic.

Performance

The company has a long-term earnings per share growth forecast of 12.7% and a dividend yield of 2.1%. The P/E ratio is 13.9 and the PEG ratio is 1.0. Eleven out of 18 analysts who follow the stock rate it a Buy or Strong Buy; none rate it a Sell. They have a mean price target on it of $51.53 per share. That is more than 10% higher than the current share price.

The share price has risen about 12% in the past three months and is more than 24% higher than a year ago. The stock is above the 50-day and 200-day moving averages. Year to date, Tyco stock has outperformed competitors General Electric (NYSE: GE), Honeywell (NYSE: HON) and United Technologies (NYSE: UTX), as well as the broader markets.

Action Items:

Bullish: Investors interested in exchange traded funds invested in Tyco might want to consider the following trades:

  • Vanguard Industrials ETF (NYSE: VIS) is more than 5% higher than a year ago.
  • Rydex S&P Equal Weight Industrials (NYSE: RGI) is almost 6% higher than a year ago.
  • Industrial Select Sector SPDR (NYSE: XLY) is more than 6% higher than a year ago.

Bearish: Traders may want to consider this alternative position:

  • ProShares UltraShort Industrials (NYSE: SIJ)

Neither Benzinga nor its staff recommend that you buy, sell, or hold any security. We do not offer investment advice, personalized or otherwise. Benzinga recommends that you conduct your own due diligence and consult a certified financial professional for personalized advice about your financial situation.

 

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