Diversified manufacturing and service company Tyco International (NYSE:TYC) is set to report Q4 and full-year earnings for fiscal 2006 before the market opens this Wednesday morning. The Fool is here with a primer on the company and its current outlook.

What analysts say:

  • Buy, sell, or waffle? According to Reuters Estimates, 14 Wall Street analysts follow Tyco. Eight of them are holding, while the other six have issued buy ratings.
  • Revenues. The average forecast calls for $10.6 billion of net sales, up from $8.6 billion last year.
  • Earnings. $0.49 per share would satisfy the average analyst. That would be a slight uptick from the year-ago net take of $0.48 per share.

What management says:
With the high-profile trial of former CEO Dennis Kozlowski in the public eye, Tyco's current management has stayed fairly low-key of late. The outlook portion of its latest earnings report confined itself to an earnings projection of $0.47 to $0.49, excluding special items, and a note that free cash flow for 2006 should exceed 2006 net income.

What management does:
Gross and operating margins have hit the skids, while net margins actually peaked a bit lately. A couple of recent restructuring moves should have a small impact on this quarter's net margins, while operational margins should rebound somewhat.

Margins %

4/05

7/05

9/05

12/05

3/06

6/06

Gross

36.2

36.0

34.7

34.3

33.9

33.3

Op.

15.4

15.4

13.9

13.5

13.5

13.1

Net

6.0

6.7

7.6

7.2

9.2

8.3
All data courtesy of Capital IQ, a division of Standard & Poor's. Data reflects trailing-12-month performance for the quarters ended in the named months.

One Fool says:
Tyco is reforming itself a bit, selling its printed circuit board operations to TTM Technologies (NASDAQ:TTMI) while picking up Confluent Surgical, a maker of sprayable sealants for surgical use. Its health-care, electronics, and security segments provide a balanced revenue flow, while the engineered products division has been somewhat of a drag on margins and a smaller component of sales.

Revenue growth has been hesitant for a couple of years, averaging about 3%. During the same time period, operating income has declined 3.9%. And the public black eye from its former management's scandals continues to mar Tyco's image. But its security systems are top-notch and market-leading, its health-care division remains a strong competitor, and management seems to have a plan for returning to the 19% operational margins of old.

Give Tyco some time to complete its restructuring programs. The stock price won't return to the pre-scandal high $50s anytime soon, but this is a strong collection of businesses with a management team quietly determined to make things right again. As for the coming report, Tyco is in the habit of outperforming its own guidance by a couple of pennies, and a repeat of that performance level would come as no surprise.

Competitors:

  • 3M (NYSE:MMM)
  • Siemens AG (NYSE:SI)
  • Koninklijke Philips (NYSE:PHG)
  • Honeywell International (NYSE:HON)
  • Corning (NYSE:GLW)

Tyco and 3M are Inside Value picks and TTM is a Stock Advisor selection. Sign up for a free 30-day trial of any of our newsletters to get a jump on the market.

Fool contributor Anders Bylund holds no position in any of the companies discussed here. You can check out Anders' holdings if you like, and Foolish disclosure is good for what ails ya.