CORRECTED – UPDATE 4-Tyco profit tops forecasts, eyes spin-off

(corrects paragraph 8 to show spin-off of electronics and
health businesses was done in 2007, not 2008)

* Q2 shr ex-items $0.59 vs. $0.55 expected

* Sees 2010 EPS from cont ops $2.50 to $2.58

* To spin off electrical/metal business
(Adds details on earnings guidance)

By Nick Zieminski

NEW YORK, April 27 (BestGrowthStock) – Industrial conglomerate Tyco
International Ltd (TYC.N: ) reported better-than-expected
quarterly profit and sales on Tuesday and said it will spin off
its electrical and metal products business to shareholders.

The company, which is weeks away from completing a large
acquisition to expand its ADT security business, raised its
full-year profit forecast but said its new guidance did not
include any contributions from the acquired business.

It was not immediately clear whether Tyco’s new 2010
earnings range of $2.50 to $2.58 per share from continuing
operations was directly comparable to the $2.59 per share
analysts were expecting.

The conglomerate has been remaking its portfolio of
businesses in recent years, and on Tuesday said it would spin
off its electrical and metal products business via a tax-free
distribution to shareholders.

The unit, with 2009 sales of $1.4 billion, makes steel
tubes and pipes and other components for construction and other
uses. It is headquartered outside Chicago and employs about
3,200 people, with operations in the United States, Canada,
Mexico, Brazil, Britain, France, Australia, China and the
Middle East. Tyco expects the transaction to be completed in
the first half of its 2011 fiscal year.

Tyco’s cash position is improving and will be enhanced
further by the spin-off, said Oliver Pursche, executive vice
president with Gary Goldberg financial services in Suffern, New
York. The firm runs the GMG Defensive Beta Fund and holds Tyco
shares in separate accounts.

“They’re going to be able to demand some pretty rich
valuations,” Pursche said. “I wouldn’t be surprised if they
were able to fetch in the $15 billion to $18 billion range.”

In 2007, Tyco spun off its electronics and healthcare
businesses into separate publicly traded companies, Tyco
Electronics Ltd (TEL.N: ) and Covidien Plc (COV.N: ).

EARNINGS BEAT

Tyco’s net earnings were $310 million, or 65 cents per
share, for the fiscal second quarter ended March 26, compared
with a loss of $2.6 billion, or $5.42 per share, a year
earlier, when results included large charges.

Earnings from continuing operations were 59 cents per
share, excluding items. Analysts, on average, had expected a
profit of 55 cents per share, according to Thomson Reuters
I/B/E/S.

Revenue of $4.17 billion compared with Wall Street
forecasts for $4.14 billion.

This earnings season, many companies have been beating
expectations by 10 percent or so, so Tyco’s beat is actually
slightly disappointing and its full-year outlook will be key,
Pursche said.

Although the economy is improving, free cash flow “is king”
for a company like Tyco, which could put the money toward
growing through acquisitions or a higher dividend, Pursche
said.

Sales rose at Tyco’s ADT Worldwide security unit and its
electrical products segment, but fell in the fire protection
and flow control segments.

ADT, the biggest unit, boosted its operating income and
improved margins, as higher recurring revenue offset weakness
in new system installations, which reflects the ongoing malaise
in nonresidential construction.

Tyco is expected to close a $1.9 billion deal next month to
buy Brink’s Home Security Holdings Inc (CFL.N: ), which operates
as Broadview Security and provides residential and commercial
security services, to expand its ADT business.

Stock Market Today

(Reporting by Nick Zieminski; Editing by Derek Caney, Gerald
E. McCormick, Dave Zimmerman)

CORRECTED – UPDATE 4-Tyco profit tops forecasts, eyes spin-off