Tyco (NYSE: TYC ) hasn't made it easy for shareholders to hang on. After all, guidance has been a little squishy of late, and the stock hasn't performed nearly as well as other conglomerates like Danaher (NYSE: DHR ) or United Technologies (NYSE: UTX ) .
Fiscal first-quarter revenues were up all of 1%. Please control your excitement, especially you growth investors. True, organic revenue growth was higher (up 4%), but that's still not exactly an impressive result, now, is it? Revenue growth, such as it was, was led by electronics and engineered products (8% organic growth apiece). Fire/security and health care lagged behind with 1% organic growth.
Operating income actually dropped in the quarter, and Tyco benefited from lower taxes and the absence of "other expense" from the year-ago quarter. Nevertheless, earnings per share from continuing operations were still up about 15%, though operating and free cash flow were both down.
Tyco is a case-in-point as to why I'm glad I use a miserly margin of safety when examining stocks. For instance, the stock looked promising in late December, but not quite good enough. Now it's about three-and-a-half bucks cheaper and still basically the same company.
While I'm not keen on what seems to be a recent pattern of ever-lower estimates, I am optimistic about the breakup of this company. Set free to make their own way in the world, I think the three businesses (Healthcare, Electronics, Fire/Safety/Engineered Products) will do better than the combined company -- not that that's an especially high hurdle these days.
So while I'm not promising to buy these shares, I can tell you they are enticingly close to my "go ahead and buy" price target. Tyco can rightly be seen as less impressive these days, at least relative to Danaher, UTX, or maybe Siemens (NYSE: SI ) , but I do think we're getting close to a price level that constitutes an overreaction to current difficulties.
For more conglomerate thoughts:
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Fool contributor
Stephen Simpson
has no financial interest in any stocks mentioned (that means he's neither long nor short the shares).
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