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TYC Earnings Beat Estimates

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Tyco International Ltd reported income from continuing operations of $74 million or 16 cents per share in second quarter 2013 versus $134 million or 29 cents per share in the year-ago quarter. Income from continuing operations was negatively impacted by special items totaling $124 million.

Income from continuing operations (before special Items) stood at $198 million or 42 cents per share versus $141 million or 30 cents per share in the year-ago quarter. Quarterly adjusted earnings beat the Zacks Consensus Estimate of 40 cents.  

Revenues for the quarter increased 3.0% year over year to $2608 million, surpassing the Zacks Consensus Estimate of $2594 million. Organic revenue grew 2% in the quarter with 7% growth in products, 3% growth in service but installation revenues declined 3%.

Segment Performance

North America Systems Installation & Services

Revenues for second quarter 2013 were flat year over year at $953 million (including 2% service growth and 3% year-over-year decline in installation). Backlog in the quarter stood at $2.5 billion, up 2% sequentially, excluding the impact of foreign currency.

Operating income in the reported quarter was $79 million with an operating margin of 8.3%.  

Rest of World Systems Installation

Revenues for second quarter 2013 increased 1% to $1.1 billion, driven by acquisitions but offset by negative impact of foreign currency. Organic revenues were 1% with service up 5% but installation down 4%. Backlog of $2.6 billion increased 5% sequentially, excluding the impact of foreign currency.

Operating income for the quarter was $106 million while the operating margin was 9.8%.
Global Products

Revenues of $578 million increased 11% in the second quarter of 2013, driven by acquisitions. Organic revenues were up 7% across all the three product platforms.
Operating income before special items was $97 million and operating margin was 16.8% in the reported quarter.

Balance Sheet and Share Repurchase

Cash and cash equivalents, as of Mar 29, 2013, were $430 million versus $844 million, as of Sept 28, 2012. During the reported quarter, TYCO International repurchased 4.8 million shares for $150 million.

Cash from operating activities was $246 million and free cash flow was $134 million in the reported quarter.

 Acquisitions and Disposition

During the quarter, Tyco International acquired U.K.-based First City Care PLC an installation and service provider of access control, video surveillance and intruder alarms. First City is expected to have revenues of $20 million in 2014. Post acquisition, It will be combined with Tyco's installation and services business in the U.K.

Additionally, the company signed an agreement to purchase National Fire Solutions Group (NFS) - provider of fire protection services in Australia including installation, inspection and maintenance services. National Fire is expected to have revenues of $65 million in 2014.Post acquisition; it will be combined with Tyco's Fire Services business.
Subsequent to quarter end, Tyco International signed a definitive agreement to sell its North America guarding business.

Moving ahead, Tyco International believes that its strong balance sheet provides flexibility to continuously fund organic and inorganic growth initiatives and maximize return for its shareholders. Additionally, the two acquisitions during the reported quarter are expected to strengthen the company’s position by broadening its product and service offerings in the long term.

However, Tyco International currently has a Zacks Rank #3 (Hold). Other stocks that look promising and are worth considering now are Honeywell International   Inc (HON - Free Report) , Crane Co (CR - Free Report) and Macquarie Infrastructure Company LLC (MIC - Free Report) , each carrying a Zacks Rank #2 (Buy).                                                           

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