NEW YORK (TheStreet) -- Tyco International (TYC) stock is declining 2.67% to $30.57 in early morning trading on Wednesday after the security systems company was downgraded to "sector perform" from "outperform" at RBC Capital Markets. The firm also lowered its price target to $34 from $41.
Tyco stock is falling along with global markets after the Chinese currency weakened, North Korea allegedly tested a hydrogen bomb and tensions between Saudi Arabia and Iran increased, Reuters reports.
Shares of Tyco, which serves several industries including retail, energy and mining, declined 27% in 2015 as oil prices plummeted, RBC said in an analysts note.
The company has an approximately 5% high-margin revenue exposure to oil prices.
Last year's guidance cuts and low traction among non-residential customers also pressured the stock, which may not perform better this year because Tyco will face muted growth in its industry, analysts noted.
"Stepping back, we still have confidence in the management team and believe that execution has been solid, including restructuring, project selectivity, and bolt-on M&A," analysts added.
Recently, TheStreet Ratings objectively rated this stock according to its "risk-adjusted" total return prospect over a 12-month investment horizon. Not based on the news in any given day, the rating may differ from Jim Cramer's view or that of this articles's author. TheStreet Ratings has this to say about the recommendation:
We rate TYCO INTERNATIONAL PLC as a Hold with a ratings score of C. The primary factors that have impacted our rating are mixed - some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its increase in net income, reasonable valuation levels and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including weak operating cash flow, a generally disappointing performance in the stock itself and disappointing return on equity.
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Commercial Services & Supplies industry. The net income increased by 174.2% when compared to the same quarter one year prior, rising from -$89.00 million to $66.00 million.
- The debt-to-equity ratio is somewhat low, currently at 0.78, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.85 is somewhat weak and could be cause for future problems.
- The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. Compared to other companies in the Commercial Services & Supplies industry and the overall market on the basis of return on equity, TYCO INTERNATIONAL PLC has underperformed in comparison with the industry average, but has exceeded that of the S&P 500.
- Net operating cash flow has significantly decreased to $29.00 million or 90.06% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
- You can view the full analysis from the report here: TYC