Tyco International Ltd (TYC) reported results for the first quarter 2012. Earnings for the quarter declined 15.5% year over year to 71 cents a share, which was also well below the Zacks Consensus Estimate of 79 cents.
Revenue for the quarter grew 4% year over year to $4.2 billion. Organic revenue (revenue excluding the impact of foreign exchange translation and acquisitions) growth was 4%. Revenue was in line with the Zacks Consensus.
Segment Details
Security Solutions
Revenue for the quarter increased 2% to $2.2 billion. Recurring revenue continued to perform well with an increase of 4% driven by growth in all geographic regions. Non-recurring revenue grew 1% with strong growth in Asia Pacific and Latin America which was partially offset by declines in North America and EMEA regions.
Operating income was $339 million and the operating margin improved 70 basis points year-over-year to 17.4%. The increase in operating margin resulted from faster growth in ADT’s higher margin recurring revenue business and the continued benefit of restructuring and cost reduction initiatives.
Fire Protection
Overall revenue in the quarter was $1.1 billion, increasing by 3%. Organic revenue grew 8% and 2% in fire products. This growth was partially offset by a 5% organic revenue decline in systems installation due to continued softness in the non-residential construction market. Excluding the impact of foreign currency translation, orders increased 6% year-over-year and backlog increased 4% to $1.2 billion year over year.
Operating income was $144 million in the quarter, while the operating margin was 12.7%, up 100 basis points year over year. Increased leverage from higher volume in the product businesses, a higher mix of service revenues across all regions, and gains from productivity and cost containment initiatives drove the operating margin improvement.
Flow Control
Flow Control revenue was $923 million in the quarter, driven by strong sales in valves and continued benefits of customers accelerating the completion of installation work on some large thermal projects. Valves, which comprise about 60% of Flow Control’s annualized revenue, grew 13% organically in the quarter.
In thermal controls, organic revenue growth of 28% was driven by strong order activity over the last two quarters as thermal orders usually translate into revenue within 60 to 90 days.
Overall, total Flow orders in the quarter increased 16% year-over-year.
Balance Sheet and Share Repurchase
For the first quarter of 2012, cash from operating activities was $338 million while free cash flow (after deducting capex) was negative $36 million. This was primarily attributable to separation and restructuring activities. Cash and cash equivalents for the quarter were $1.0 billion.
During the first quarter of 2012, the company repurchased 6.8 million shares for $300 million.
Tyco International currently has a Zacks Rank #4, which implies short-term Sell rating on the stock.
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