Tyco Electronics Ltd. (TEL)

Restructuring at the leading supplier of passive electronic components should produce strong sales growth as the economy improves.

Has value components also: P/S 1.1 vs 1.3 industry, Current ratio 2.13 exceeds hurdle of 2, LT debt is less than net current assets, D/E 35% vs Ind 70%.

Considering Book value, earnings, and market cap...this should beat the market in 5 years.

Expanding sucessfully in underdeveloped countries, the last place for telecom to actually continue growth.

This CAPS account is tracking the 200 highest yielding S&P stocks.

oversold

Invesotes fell out of love. At current valuations there is limited downside with an upside potential of 50%+. Solid buisness position within their market.

Growth in the world is slowing but it's still there and the products will be needed.

It is generally difficult for stocks to come back after they moved up big and then got crushed. It doesn't mean they won't ever go back up, but there is a trust issue that makes it difficult for many investors to get back in. Tyco is a good example and I'm not talking about the toy maker, I'm talking about the conglomerate that was moving up on General Electric a while back. First it was found this company lied on earnings statements, then their CEO went to jail for embezzling much of the shareholders money. I owned this stock before the fall. Cost me about $2000 that I will probably on see $500 back after the court settlement. After this happened, I wouldn't look at the stock after, some because I lost what I considered to be a lot of money and second because I lost what I considered to be a lot of money. I know that wasn't funny, but it is the reason we lose faith.

Since then, Tyco has been split up and now has... More It is generally difficult for stocks to come back after they moved up big and then got crushed. It doesn't mean they won't ever go back up, but there is a trust issue that makes it difficult for many investors to get back in. Tyco is a good example and I'm not talking about the toy maker, I'm talking about the conglomerate that was moving up on General Electric a while back. First it was found this company lied on earnings statements, then their CEO went to jail for embezzling much of the shareholders money. I owned this stock before the fall. Cost me about $2000 that I will probably on see $500 back after the court settlement. After this happened, I wouldn't look at the stock after, some because I lost what I considered to be a lot of money and second because I lost what I considered to be a lot of money. I know that wasn't funny, but it is the reason we lose faith.

Since then, Tyco has been split up and now has the ticker TEL. They spun off all of the other businesses because the sum of the parts was worth more than the whole. TEL beat analyst estimates for the quarter by six cents or just under 10%. Net sales increased 14%. Their guidance for next quarter beat current analyst estimates by just over 10%. Full year outlook went to $2.60 to $2.66. Analyst estimates were at $2.53. Their CEO saw large increases in orders from industrial and infrastructure, plus overseas automobile markets. They increased their share buyback substantially as they had authorized $750 million and that was raised to $1.25 billion.

Their chart also looks spectacular. They had a double top breakout on April 24th that has a trend going to $59 at the current trend. Their new guidance was huge, as they blew through their current 300 day moving average, and they also hit an all time high. When they IPO'd we saw a move of up to 39.82 and they moved past that and held on high volume of a 210% increase. Just look at their current earnings estimates for this year, and we see it places the end of 2008 at a PE of 15. That number would push growth for this year to 21% and if we carried that to their PE we would see a January price at $54.60 with a one year PEG ratio of one. All things taken into account this stock looks to be a value.

When looking at the segments of their business they do have some interesting growth platforms. Electronics are still their bread and butter and generate most of their operating income. They earned $419 million vs. $351 million. Network solutions saw a decrease in earnings by six million to $63 million. Undersea telecommunications saw the biggest move to $39 million from $4 million a year earlier and wireless systems also had very good growth from $5 million to $13 million. Most importantly is this stock has been very consistent with respect to growth, the only time in recent history they haven't done well is when they had to pay a major separation fee when they went for their IPO, other than that this has looked very good. Buy dips.

Spain telephone company that dominates Latin America in phone business, Expect strong growth in their markets to continue. Can you hear me now?

This compay is the leader in its current market. Sell the product, then sell the service that goes with the product what a money maker.

Market is still hesistant and Automotive is too much apart of their revenue mix

Price to book = 1.5, debt/equity = 29%, accelerating growth, recent spin-off from large conglomerate, major player in boring business

Kozlowski's long gone and this Company has been punished much too severely for his wrong doings.

Ugh, somebody told me this one was good . . . and they bought me lunch so I had to add it. Since the spin off it's gonna go gangbusters.

Upon examination of Tyco’s share price, it is readily apparent that the company trades at a considerable discount to competitors – beyond any measure attributable to the common ‘conglomerate discount’. Given this dis-crepancy, one might logically conclude that it is trading at a discount to intrinsicvalue, and that the spin-offs might serve as a long-awaited valuation catalyst. However, such a conclusion ignores perhaps the most critical issue in evaluatingthe Tyco businesses: the company’s severe underinvestment in research and de-velopment. For example, the Tyco Healthcare business (“Covidien”) spent $262 million onR&D in FY2006, which equaled 2.7 percent of its pro forma revenue. By com-parison, competitors in its industry including Beckton, Dickinson & Co., CRBard, and Johnson & Johnson’s consumer medical devices and diagnostics seg-ment, had FY2006 R&D expense that equaled 7.1 percent, 7.3 percent and 7.2percent of sales, respectively. The resulting effect on net income is quite signifi-cant. Covidien’s projected net income for FY2007, assuming R&D spending is maintained at the FY2006 level of 2.7 percent of sales, is $1,612 million. How-ever, if the company’s R&D investment were to equal the competitor average of 7.2 percent of sales, earnings would be reduced 20 percent to $1,289 million.Tyco Electronics and the remaining Tyco International have also invested far less in R&D than their respective competitors. Tyco trades at about 16.7x consensus earnings estimates for 2007, while relevantcompetitors trade at 20x estimates, or higher. However, if alternative estimates that incorporate a comparable level of R&D investment are used, the company’s2007 earnings multiple increases to 21.7x. In summary, the three Tyco entities will be confronted with a most unfavorable scenario with regard to research and development spending. The companiesmight continue to disregard the need for increased R&D spending, and inevitablybe displaced by competitors; alternatively, they can increase spending, and there-by experience a sharp decrease in net income. Neither alternative bodes well for their futures as independent companies.

undervalued

can't see any improvement in this

Industry as a whole has been performing poorly and it will take some time for TEL to get its bearings, that's why I think it will take between two to four years for stock to take off. I expect it to outperform for these reasons:

1. It is a spin-off. They usually do better than the market.

2. Price to cash flow is considerably lower than most stocks in industry.

imyoung
long TYC since scandal, long COV since split,
? long TEL (trying to decide what to do with it)