Tyco Beats the Zacks Estimates


Tyco International Ltd. (TYC) reported strong results for the third quarter of 2012. Earnings for the quarter (excluding one-time items) grew 19% year over year to $1.01 a share. Earnings were also 8.6% above the Zacks Consensus Estimate of 93 cents.

GAAP earnings for the quarter were 54 cents a share, which were down 29% year over year compared to 76 cents reported in the prior-year quarter.

Revenue for the quarter grew 4% year over year to $4.5 billion. Organic revenue (revenue excluding the impact of foreign exchange translation and acquisitions) growth was 5%.

Segment Details

Effective second quarter 2012, the company has reorganized its business segments as Fire & Security, ADT and Flow Control.

Fire & Security

Revenue for the quarter increased 3% to $2.6 billion. Organic revenue for the quarter grew 4.0% partially offset by 4% unfavorable foreign exchange. Organic revenue grew 4% with 10% growth in products, 3% growth in service and modest growth in systems installation.

Excluding the impact of foreign currency, orders increased 9% year-over-year and backlog increased 1.5% to $4.7 billion, both on quarterly and sequential basis.


Revenue for the quarter grew 4% year over year to $815 million with organic revenue growth of 4.5%. Recurring revenue growth of 5.6% was primarily driven by 3.6% growth in average revenue per user (:ARPU) and 1.4% growth in customer accounts.

The 13.5% attrition rate for the quarter increased 30 basis points sequentially primarily due to planned price escalations and higher relocations. Non-recurring revenue declined 4.3% reflecting a business model change to more ADT-owned systems.

Flow Control

Revenue for the quarter grew 6% year over year to $981 million including a 5.5% decline due to changes in foreign currency. Organic revenue grew 10% with 7% growth in Valves, 26% growth in Water and 4% growth in Thermal Controls.

Excluding the impact of foreign currency, orders increased 5% year-over-year and backlog was in line with the prior quarter at $1.8 billion.

Balance Sheet and Share Repurchase

For the third quarter of 2012, cash from operating activities was $776 million while free cash flow (after deducting capex) was $341 million. Cash and cash equivalents for the quarter were $1.1 billion.

During the third quarter of 2012, the company repurchased 3.7 million shares for $200 million.


The company has reported a strong third quarter performance, driven by robust organic revenue growth. Order momentum over the last few quarters, coupled with continued growth in the ADT Residential business, continues to drive higher top-line growth.

Tyco’s large and stable base of recovering and service revenue, which represented 45% of its revenue in the quarter, coupled with strong operating leverage led by the Fire and Security manufacturing businesses, drove the operating performance during the reported quarter. All the three operating segments of the company also posted strong revenue growth.

Tyco International currently has a Zacks Rank #3, which implies a short-term Hold rating on the stock.

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