Wall St. bully on Tyco break-up
NEW YORK--Tyco International's stock hit a 52-week high on May 31, one month before the expected split of the conglomerate into three separately traded entities. It's a possible indication, said Jack Mallon, managing partner of Mallon Associates, that Wall Street "expects that there are better things ahead with the break up."
Up 20 percent over the year, "the stock has performed well over the past six months or so and is now selling at a multiple of 18 times trailing PE ratio and ... it's at a respectable 1.5 times sales and 1.87 times book," Mallon said. "Tyco also has the advantage of being a large-cap company and right now the market is high on large caps."
"Stockwise they're doing well; numbers-wise they're mediocre," Mallon said.
Mallon said Tyco's balance sheet in the past three years has shown "stability, but no dramatic growth," with assets "harbored around $63 billion for years now."
Revenues have gone from $40.1 billion in '04 to $42.4 billion in '06. "They're not exactly setting the world on fire," Mallon said, while net income has "inched up from $2.8 billion in '04 to $3.5 billion in '06."
Noting a bright spot on the balance sheet, Mallon pointed out that Tyco reduced its long-term debt from $14.6 billion in '04 to $9.3 billion in '06.
Mallon said that Wall Street will be paying close attention, post-break up.
Tyco has "not been involved in any material M&A [in the last three years] and Wall Street will want to see if they're ready to step out," he said.