For a company that is supposed to be in one of the more attractive industrial markets, fire and security, Tyco (NYSE:TYC)
hasn't lived up to investor expectations. With weaker than average
growth and margins, Tyco has been lagging other fire/security players
like Honeywell (NYSE:HON), United Technologies (NYSE:UTX), Stanley Black & Decker (NYSE:SWK), and Allegion (NYSE:ALLE) for some time, not to mention the market as a whole (as measured by the S&P 500).
Can
the company reverse this unimpressive trend? I can't immediately think
of another company in this size range with as much exposure to the
non-residential construction market (though Ingersoll-Rand (NYSE:IR)
is close), both here and abroad, and perhaps the protracted lull in
that market explains some of Tyco's underpeformance. That said,
management needs to address what seems to be an elevated level of
corporate expenses and a relatively bad track record of meeting
projections.
I don't see a large amount of undervaluation here,
but this is a significant "self help" story where outperformance on
margins can have a disproportionate benefit on the valuation. It's also
arguably still at a size where a larger conglomerate could consider it
an acquisition target, particularly with the prospect of rooting out the
company's elevated cost structure.
Read the full article here:
Can Tyco Break Out Of A Persistent Lagging Trend?
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