Before the Tuesday morning bell, we'll get a report from global conglomerate Tyco International (NYSE:TYC). Let's check up on the progress at this soon-to-be-split service and manufacturing group and Motley Fool Inside Value pick.
What analysts say:
- Buy, sell, or waffle? Four out of 13 Wall Street analysts covering the company are buying Tyco today. Another eight would like to hold, and the last one is a seller. In our Motley Fool CAPS investor community, it's a four-star stock, based on more than 280 user ratings.
- Revenues. Here, $10.8 billion would really hit the spot, according to the analysts. It would also be a 5.5% increase from last year's $10.2 billion.
- Earnings. The average prognosticator prognosticates $0.47 per share, up from $0.45 a year ago.
What management says:
CEO Ed Breen recently explained how the various markets under his purview are developing: "After a period of strong growth, we are seeing some slowing in certain electronics markets, in particular the computer and communication infrastructure equipment markets, which we believe will strengthen as we move further into the year. In addition, we expect metals spreads in engineered products and services to continue to be weaker than last year in the second quarter, with improvement in the second half of the year." Ah, the joys of diversity.
What management does:
What's going on with the steadily decreasing free cash flow ratio? There are two reasons for that turn: increased capital spending in preparation for the three-way split later this year, and an unusually fat operational cash flow pipe seven quarters ago, based on favorable working capital changes.
That hasn't stopped Tyco from running a tight ship, judging by the ROE and ROA metrics -- while also growing both the common equity and total asset balances. Nice work.
|
9/2005 |
12/2005 |
3/2006 |
6/2006 |
9/2006 |
12/2006 | |
|---|---|---|---|---|---|---|
|
Gross |
34.9% |
34.6% |
34.2% |
33.6% |
33.4% |
33.4% |
|
Operating |
14.2% |
14.1% |
13.9% |
13.4% |
14.6% |
14.6% |
|
Net |
7.9% |
7.5% |
9.6% |
8.6% |
8.8% |
9.1% |
|
FCF/Revenue |
12.4% |
12.1% |
10.1% |
9.6% |
9.7% |
9.1% |
|
Efficiency Ratios |
9/2005 |
12/2005 |
3/2006 |
6/2006 |
9/2006 |
12/2006 |
|---|---|---|---|---|---|---|
|
Return On Assets |
5.5% |
5.5% |
5.5% |
5.5% |
5.9% |
6.1% |
|
Return On Equity |
9.9% |
10.0% |
11.9% |
11.2% |
11.6% |
11.3% |
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:
Regulatory proceedings have delayed that three-way split a bit. Originally announced in January 2006, the split is now expected to run its course by the end of June, and then you'll be able to invest in Tyco Healthcare (a.k.a. Covidien), Tyco Electronics, or the still-combined engineered products and fire and safety operations.
A breakup of this magnitude doesn't come very often. There just aren't that many $60 billion conglomerates out there, and I don't think General Electric (NYSE:GE), 3M (NYSE:MMM), or United Technologies (NYSE:UTX) are going under the surgeon's knife anytime soon.
For a full rundown on what the split means to investors, check out Philip Durell's analysis on behalf of Inside Value subscribers. It's free with an all-access 30-day pass, though you may never want to leave.
3M is also an Inside Value recommendation.
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 will help you find the road ahead.
