Tags: Tyco | split | stocks | TYC

Tyco Split Creates Three New Stocks

By    |   Thursday, 10 Nov 2011 12:35 PM

Tyco International (TYC) is a company in the conglomerate style popular in the 1970s. Now the company has decided to split up the conglomerate, a move that creates three new stocks. Investors looking at Tyco will eventually end up with shares of the three separate companies and will be able to evaluate each on its individual merits.

The three business segments of Tyco are the residential security business of ADT North America, a group of companies providing flow control products (valves), and, finally, commercial security and fire alarm/suppression services.

Commercial fire and security generates just under 60 percent of current annual revenues and the balance is evenly split between the other two business segments.

For the 2011 third quarter, which closed on June 24, Tyco reported net income from continuing operations of 84 cents per share, up from 72 cents on flat year-over-year revenues of $4.3 billion.

Revenues actually increased by 10.5 percent, excluding the results of a business sold in December 2010. For the full year 2011, the consensus earnings estimate is $3.17 per share, compared to $2.68 earned in 2010.

Segment results

A breakdown of the third quarter result gives an indication of the profit potential of the three business segments:

Residential security solutions: revenue, $2.16 billion, up 13 percent; operating income, $358 million, up 26 percent.
Flow control: revenue $928 million, up 9 percent; operating income $106 million, down 11 percent.
Commercial fire protection: revenue $1.2 billion, up 8 percent; operating income, $158 million, up 13 percent.

The individual company spinoff is expected to occur approximately 12 months after the September 2011 announcement. Investors can watch the individual segment results for the four quarters to get a picture of the individual business results.

After the announcement of the company breakup, the Barclays Capital analysts reiterated their equal weight rating on the stock and confirmed a target price of about $50 per share.

The company reports next on Nov. 16.

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Tyco International (TYC) is a company in the conglomerate style popular in the 1970s. Now the company has decided to split up the conglomerate, a move that creates three new stocks. Investors looking at Tyco will eventually end up with shares of the three separate companies...
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2011-35-10
Thursday, 10 Nov 2011 12:35 PM
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