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Mixed Bag at Tyco

The conglomerate isn't pleased with a top-line shortfall.
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Tyco (TYC) matched Wall Street's fiscal first-quarter profit target Thursday, but its top line was light and its second-quarter outlook soft.

The conglomerate, which three weeks ago set plans to

break into three separate companies while trimming earnings guidance for the first quarter and year, said organic revenue growth during the quarter -- reflected growth not related to acquisitions -- was 4%. Free cash flow was $230 million and cash flow from operating activities $675 million.

"On an overall basis, we delivered good organic growth; however, we are not satisfied with our operating performance this quarter, and we are focused on addressing the issues that arose in several areas," said CEO Ed Breen. "We are confident that we are taking the right actions and expect to make meaningful progress throughout the remainder of the year."

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For the quarter ended Dec. 31, Tyco made $570 million, or 39 cents a share, from continuing operations, down from the year-ago $709 million, or 34 cents a share. Excluding special items, the latest-quarter profit was 39 cents a share, a penny better than the Thomson First Call estimate. Revenue rose to $9.71 billion from $9.6 billion a year earlier, falling short of the $9.84 billion target.

In electronics, revenue rose 5% from a year ago on a reported basis and 8% organically to $3.02 billion. Fire and security revenue fell 3% as reported to $2.79 billion but rose 1% on an organic basis. Healthcare revenue dropped 1% as reported to $2.29 billion but rose 1% organically. Engineered products revenue rose 6% as reported and 8% organically to $1.6 billion.

The company said it expects to make 40 to 42 cents a share for the second quarter on a continuing operations basis, excluding certain items. That's short of the 47-cent Thomson First Call estimate. But the company reaffirmed its Jan. 13 full-year target of $1.85 to $1.92 a share. Tyco, which before that warning had been expected to make $2.01 a share for 2006, said it further expects that 2006 free cash flow, excluding the cash impact of previously disclosed legal items, will exceed net income excluding special items. In the second quarter, the company expects to make cash payments of approximately $450 million for previously disclosed legal matters.