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Non-Tech : Tyco International Limited (TYC)
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To: JDN who wrote (3715)10/25/2006 7:39:24 PM
From: rich evans  Read Replies (2) of 3770
 
Not much to say about TYCO. It has been a dead stock for over 12 months. In May of 2005 , tyco gave conferences talking about margins, organic growth etc and 2006 estimates. None of the projections occured and stock languished. Why- As to Margins, Tyco got hit with huge commodity cost increases in copper, steel and pulp and oil.This hurt overall margins by 1.5% for the company. Individual segments like electronics took a 3.3% hit, diapers margins went from 20% to 6% and steel spreads cost about 45mill a quarter.
As to Growth- The Security new business model was slow to ramp up and growth was 0. Health had many problems in image, respiratory and diapers and growth went to 1% from the projected 5-8%. All in all Tyco did 3% growth instead of the 6% projected.

So earnings in 2006 will be maybe 2cents better then 2005- 1.83 versus 1.81 in 2005 both after stock option expense. Earnings should have been 2.05 to 2.08 in 2006

So the interesting question is will growth comback to the 5-6% range and margins go up in 2007 and how will separartion effect stock and PEs. Us Bulls are expecting a comeback in margins, growth and higher overall PE as separate companies.
Solving the margin problem gives Tyco at least another 1% overall operating margin. Growth in Q2 and Q3 have returned to 5% and could get to 6%. Run these numbers and Tyco could get to $2.25sh for 2007 without the split up.

So it is a wait and see. And that is why Tyco board is dead.
Rick
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