Tyco Earnings More Than Triple, Beating Estimates

Even though the stock is down in concert with the rest of the market, analysts applauded the results.
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Tyco International

(TYC)

today reported that its earnings more than tripled in its fourth fiscal quarter, exceeding Wall Street's expectations.

At the same time, the company indirectly attempted to lay to rest the accusations of accounting irregularities brought on by a money manager last week.

Analysts applauded the earnings report by the diversified manufacturing and services company. "They were better than I expected," exclaimed Jack Blackstock, the multi-industry analyst at

Donaldson, Lufkin & Jenrette

. "Now my $4.30 number for next year is looking conservative," he continued, referring to his earnings-per-share forecast for fiscal 2000. Blackstock has a buy rating on the company.

But the stock still came under pressure today, falling 2 3/16 to 86 1/8 in late-morning trading. Analysts attributed the selling to the stock market's general weakness, brought on by the sharp plunge in

IBM's

(IBM) - Get Report

shares.

For the fourth quarter ended Sept. 30, Tyco reported earnings before extraordinary items rose to $782.7 million, or 92 cents a diluted share, from $207.0 million, or 25 cents a share, a year earlier. That is 3 cents higher than the

First Call/Thomson Financial

analyst consensus. Revenue rose 18% to $22.5 billion from $19.1 billion a year ago.

The results were restated to reflect Tyco's acquisitions of

AMP

and

U.S. Surgical

.

Tyco management attributed its profit growth to higher sales and cost cuts at AMP and U.S. Surgical.

Michael Jaffe, senior investment officer at

Standard and Poor's Equity

, praised Tyco's "very smart business model and very excellent management. At this point, there doesn't seem to be anything in the way of their EPS momentum." He also noted that Tyco's operations are well placed to resist any looming recession worries, singling out their undersea telecommunications cable capacity, fire and security services and disposable medical products.

In a statement, L. Dennis Kozlowski, Tyco's chairman and chief executive, stressed, "With backlog at record levels for the company, we believe that this level of growth is sustainable for Tyco in its upcoming fiscal year." That remark apparently spoke directly to fund manager David Tice's concerns that fuzzy accounting obscures the company's actual growth, or lack of it.

The sell side continued to defend Tyco. "The question is whether there were accounting irregularities, and the answer is there are not," DLJ's Blackstock stated emphatically. Jaffe of S&P characterized Tice's comments in the category of rumor and said, "The company spent one hour on a conference call last week and really refuted all the allegations. They certainly convinced me."

James Samuels of

Banc of America Securities

said, "There's a lot of subjectivity in regard to accounting issues. Just because one methodology doesn't adequately reflect business conditions at a certain point in time is not Tyco's fault." Samuels has a strong buy on Tyco.