Tyco International Limited (TYC) Message Board

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Non-Tech : Tyco International Limited (TYC)

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To: rich evans who wrote (3693)	11/30/2005 11:56:59 AM
From: rich evans	of 3770

For Q1 tyco guided 42 cents/share after option expense which equals 44 cents normally. This should be a piece of cake. It assumes a 3% revenue increase year to year from 9600 mill to 9900 mill and maintaining 14.3% operating margin. Tyco as they have done every other quarter should beat this by a penny or two. The year guidance of 10% increase in earnings however is a harder slog. 10% increase from 1.88 is about 2.07/share. This will require a 4% overall increase in yearly revenues and an increase of operating margin from the year figure of about 14.8% -15% to about 15.5%. This might be hard to do with the commodity costs still affecting the company and price increases hard to pass on as tyco found out with their diaper business. There will be plenty of uses for tyco's cash generated also. Stock buyback continues at a 700mill per quarter clip, Masimo Judgment of 420mill must be paid, 200 mill costs in electronics restructure expenses to move/close 16 plants will be incurred, debt due in 2006 is about 1700 mill and tyco will be calling the 1200 mill in class A converts( probably issue stock for this),plus probably a billion dollars for class action settlements. All in all Tyco for the year will have a busy time and I do not look for a breakout in the stock price to the upside. Hurricance damage though should help business in EarthTech,Valves,steel products but the 90000 lost customers in Fire/Security at $30/mo per customer is 2.7mill a month in lost revs. Hopefully, tyco's operational efficiency programs will improve tyco's margins and growth will rebound to 4-6% as orginally forecast. One reason for tyco's low price is margins have stabalized and declined in Q4 and growth which was supposed to be over 6% only came in at 3% for the year. So tyco gets valued as a no-growth cash generater at 10 times FCF and not as a growth stock. Maybe Warren Buffett knows something though. There must be some reason he bought 3 bill worth of stock. Rick

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