Tyco International: “1Q profits rise by 9%”

Diversified manufacturer Tyco International Ltd. said Thursday its first-quarter profit rose 9 percent helped by cost-cutting measures, higher-than-expected revenue and stronger margins for its ADT security business.

In addition to security products, Tyco makes fire detection systems, steel tubing, and valves and pipes for the water, oil and gas markets. On a conference call with analysts, Chairman and CEO Ed Breen said recurring revenue from service contracts with security and fire product users continues to be strong, although new installations of fire detectors and security systems remain soft. Breen said that although demand for steel and copper building products remains weak, prices of both commodities are beginning to increase. That will boost the performance of Tyco’s electrical and metal products segment in the second half of the year. For the quarter ended Dec. 25, the company earned $302 million, or 63 cents per share, compared with $277 million, or 58 cents per share, in the same period a year ago. Excluding one-time items, the company said it earned 65 cents per share.

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Revenue slid 4 percent to $4.2 billion from $4.4 billion, with declines seen across all segments except ADT. Analysts polled by Thomson Reuters expected earnings of 60 cents per share on revenue of $4.2 billion. Analysts typically exclude one-time items from their estimates. The results “reflect moderately higher revenue than expected as well as the benefits of our actions to reduce our cost structure in this challenging economic environment,” Breen said. Cost cutting helped boost operating margins at its ADT Worldwide security business to 14 percent from 12.5 percent in the year-ago quarter. Tyco announced an agreement earlier this month to buy Brinks Home Security Holdings Inc., now operating as Broadview Security, for about $2 billion. The deal is expected to close in the second half of Tyco’s fiscal year.

Looking ahead, Tyco expects revenue in the second quarter — seasonally its weakest — to total about $4.1 billion. Earnings from continuing operations excluding one-time charges or gains are expected to range between 50 cents and 52 cents per share. Tyco reiterated its full-year adjusted earnings forecast of $2.30 to $2.50 per share. On average, analysts are predicting higher quarterly profit of 57 cents per share on revenue of $4.18 billion and full-year earnings of $2.56 per share. However, Tyco said its guidance doesn’t factor in any pick-up in the economy. Shares of Tyco, based in Schaffhausen, Switzerland, fell 62 cents to $35.88 in midday trading.

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