Tyco International Warns on 2009; Shares Slide

Tyco International warned that fiscal-year profit would be well below Wall Street forecasts because of the economic downturn and the impact of the stronger U.S. dollar, sending the industrial conglomerate's shares down nearly 13 percent.

The outlook on Tuesday came as Tyco reported higher-than-expected quarterly earnings on strong pricing in its electrical and metal products segment and increased demand for its valves and temperature controls.

The company said commercial markets were slowing in its ADT security business, the stronger U.S. dollar would hurt its flow control division, and tighter government budgets would affect spending on its safety products.

While Tyco said results were hard to predict, it forecast earnings of $2.20 to $2.50 per share from continuing operations for the year, which began on Sept. 27. Analysts, who had recently cut their profit outlooks, were expecting $3.02, according to Reuters Estimates.

Sales from existing businesses will be flat to down 4 percent for the year, Tyco said.

The company added that restructuring benefits, a lower tax rate and fewer shares outstanding would support 2009 earnings as its operating units focus on controlling costs and maintaining pricing. It said that it would continue to look for acquisitions, but would be more cautious about share buybacks until credit markets stabilize.

Earnings Top Forecasts

Earlier, the company reported net earnings more than doubled to $434 million, or 91 cents per share, in the fourth quarter ended Sept. 26 from $181 million, or 36 cents per share, a year earlier.

Earnings from continuing operations, excluding restructuring costs and other special items, were 81 cents per share. On that basis, analysts expected 73 cents.

Revenue rose 7 percent to $5.28 billion, compared with Wall Street forecasts of $5.31 billion.

Tyco's flow control segment reported a 24 percent jump in quarterly profit, led by demand for valves and thermal controls. Profit almost doubled in the electrical and metal, or E&M, business, whose products include tubes, pipes and wiring components, amid strong pricing.

"The key driver of higher operating income was a stellar performance from E&M," Deutsche Bank analyst Nigel Coe said.

Profit was down at ADT, Tyco's biggest business, in part because of weak demand from retailers in the United States and Europe.

The company's shares were down $3.28, or 12.9 percent, at $22.06 in early New York Stock Exchange trading.

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