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Tyco International Beats Estimates

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Tyco International Ltd. reported earnings per share (EPS before one-time items) of 40 cents in first quarter 2013 versus 26 cents in the year-ago quarter. Quarterly earnings beat the Zacks Consensus Estimate by a penny. Income from continuing operations stood at $159 million or 34 cents versus $98 million or 21 cents in the year-ago quarter.

Revenues for the quarter increased 5.0% year over year to $2600 million, surpassing the Zacks Consensus Estimate of $2559 million. The increase in revenues was driven by a 3% benefit from acquisitions. Organic revenue grew 1% in the quarter with 6% growth in products, 2% growth in service but a 3% decline in installation revenue.

Segment Performance

Earlier, in the fourth quarter 2012, the company had reorganized its business segments as North America Systems Installation & Services, Rest of World Systems Installation and Global Products following the spin-off of ADT and Flow Control business.

North America Systems Installation & Services

Revenues for first quarter 2013 increased 1.5% to $976 million. Organic revenues for the quarter increased 1.0%. Backlog in the quarter stood at $2.4 billion, down 3% sequentially excluding the impact of foreign currency.

Operating income in the reported quarter was $108 million with an operating margin of 11.1%. Operating margin grew 110 basis points year over year  on higher mix of service revenue and continued productivity benefits, partially offset by increased synergy costs associated with the separation of the ADT residential security business from the commercial security business, Tyco Integrated Security.

Rest of World Systems Installation

Revenues for first quarter 2013 increased 3% to $1.1 billion driven by accretive acquisitions. Organic revenues were flat with service up 3% but installation down 5%. Backlog of $2.6 billion increased 3% sequentially, excluding the impact of foreign currency.

Operating income for the quarter was $114 million while the operating margin was 10.5% versus 10.4% in the year ago quarter.

Global Products

Revenues of $534 million increased 16% in the first quarter 2013, driven by acquisitions. Organic revenues were up 6% across all the three product platforms.

Operating income for the quarter was $74 million and the operating margin was 13.9% versus 17.6% in the year-ago quarter. The year-over-year margin decrease was  due to higher research and development and sales investments.

Balance Sheet and Share Repurchase

Cash and cash equivalents for first quarter 2013 were $501 million. During the reported quarter, TYCO international purchased 1.8 million shares for $50 million and the company increased its authorization for repurchase to $750 million. During the quarter the company proposed a shareholder approval for a 7% annual dividend increase from 60 cents to 64 cents per share.

The company expects an increase in investments in research and development going forward, and some traction in its productivity and sourcing initiatives, which would benefit the company in the near tem. However, the company needs to be wary of its competitors, which include formidable names such as Jardine Strategic Holdings Ltd. and Federal Signal Corp. (FSS - Free Report) .
Tyco International Ltd currently has a Zacks Rank #1 (Strong Buy). One of its competitors, ITT Corporation (ITT - Free Report) carries a Zacks Rank #2 (Buy).

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