Tyco Misses on Breakup Charges

Tyco International said Tuesday morning its Q2 net income dropped 6.7%, falling short of analyst expectations. The diversified conglomerate said net earnings were $835 million ($0.41/share), down from $895 million ($0.43) a year ago. Analysts were expecting $0.47. Tyco took a $0.05/share charge for breakup costs and a $0.02/share charge for restructuring. Sales revenue was up 7% to $10.8 billion on strong Europe and Asia growth. Tyco runs four business segments: Electronics, Fire & Security, Healthcare and Engineered Products & Services. The Electronics and Engineered Products unit saw better-than-expected Q2 growth, it said. Tyco expects 5.5-6.5% Q3 sales growth and 3.5-4.5% organic revenue growth. Tyco International bondholders rejected Monday the company's offer to buy back $6.6 billion of debt securities, which will likely make it even more expensive for the company to split up. CEO Ed Breen filed in January to split the company into three in an effort to boost share prices. The company plans to spin off its electronics and health-care units to shareholders, while Breen will run the remaining company including ADT security, fire equipment and services, and industrial valves. Shares are up 14.8% over the last year.

Sources: Press release, MarketWatch, Bloomberg
Commentary: Pre-Spinoff Tyco Is A Buy • Tyco: Breaking Up and Taking Off • Tyco Shaping Up: Let the Contrarian Investors Rejoice!
Stocks/ETFs to watch: Tyco International Ltd. (TYC). Competitors: Honeywell International Inc. (HON), Johnson & Johnson (JNJ), United Technologies Corp. (UTX), Molex Inc. (MOLX). ETFs: PowerShares Industrial ETF (PRFN), Vanguard Industrials ETF (VIS), iShares S&P Global Industrial ETF (EXI)

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