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Tyco Q4 Earnings In Line with Estimates, Revenues Lag

Tyco International LtdTYC reported fourth-quarter fiscal 2015 adjusted income from continuing operations of 61 cents per share compared with 56 cents in the prior-year quarter, driven by successful productivity initiatives and cost-out actions. The adjusted earnings were in line with the Zacks Consensus Estimate.

Tyco Internat (TYC) - Earnings Surprise | FindTheCompany

Net income from continuing operations came in at $82 million against a loss of $75 million in the year-ago quarter. GAAP income from continuing operations was 19 cents per share versus GAAP loss of 17 cents per share in the year-ago quarter.

Revenues decreased to $2,505 million in the reported quarter from $2,703 million in the year-earlier quarter, missing the Zacks Consensus Estimate of $2,536 million. A stronger U.S. dollar against foreign currencies had a negative impact of 7% on the top line. Also, organic revenues declined 1% in the reported quarter. Inorganic growth contributed 2%, which was partially offset by the impact of divestitures.

Segment Performance

North America Integrated Solutions & Services (previously known as North America Systems Installation & Services): Fourth-quarter revenues came in at $1,012 million, unchanged from the prior-year quarter, as organic growth was offset by a weak Canadian dollar. Segment organic growth of 2% was driven by 3% growth in service revenue and 1% growth in integrated solutions revenue.

Backlog was $2.5 billion, up 2% year over year. Operating income came in at $158 million compared with $117 million in the prior-year quarter. Operating margin improved to 15.6% from 11.6% in the prior-year quarter, driven by improved execution, revenue growth and successful restructuring and productivity initiatives

Rest of World Integrated Solutions & Services (previously known as Rest of World Systems Installation & Services): Revenues decreased 18% year over year to $827 million primarily due to a 13% adverse impact from currency translation. Organic revenue declined 3% during fiscal fourth quarter, dragged down by weakness in integrated solutions.

However, a backlog of $1.9 billion reflected an increase of 4% year over year. Operating income came in at $56 million compared with $102 million in the prior-year quarter. Operating margin was at 6.8% compared with 10.1% in the prior-year quarter, as the positive impact of successful restructuring and productivity initiatives was more than offset by softness in revenues and the contributing mix of geographies.

Global Products: Revenues were $666 million in this segment, down 2% year over year, due to weak organic growth. Acquisitions contributed 7% to revenue growth but this was offset by adverse foreign currency translation. Operating income came in at $89 million compared with $129 million in the prior-year quarter. Operating margin was at 13.4% compared with 18.9% in the prior-year quarter.

Acquisitions & Divestitures

During the fiscal fourth quarter, Tyco completed the acquisition of FootFall, a global retail intelligence leader for approximately $60 million in cash. The addition of this business to Tyco's operations is expected to augment its revenues by about $40 million annually, and will likely be accretive to future earnings.

Also, Tyco is planning to divest a piping components business within its Global Products segment. The unit under consideration contributed roughly $45 million in revenue in fiscal 2015.

Balance Sheet and Cash Flow

Cash and cash equivalents at fiscal fourth quarter end were $1,401 million with long-term debt of $2.2 billion. Cash provided from operating activities totalled $31 million compared with $311 million in the year-ago quarter. Adjusted free cash flow generated during the quarter was $339 million compared with $312 million in the year-ago quarter.

Outlook

Tyco expects first-quarter fiscal 2016 recurring earnings of about 40 cents per share. For fiscal 2016, the company expects earnings (before special items but including restructuring and repositioning charges) in the range of $2.05 to $2.20 per share.

Tyco currently has a Zacks Rank #3 (Hold). Some better-ranked stocks in the sector are Lakeland Industries Inc. LAKE with a Zacks Rank #1 (Strong Buy), and Alarm.Com Holdings, Inc. ALRM and Gilead Sciences Inc. GILD , both with a Zacks Rank #2 (Buy).

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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