Merrill Keeps Buy on Tyco

Analyst John Inch notes the conglomerate's stronger-than-expected revenue and cash flow

Tyco International (TYC ) posted $0.30 vs. $0.82 Q4 EPS from continuing operations (pro forma). Merrill Lynch reiterated its buy rating on the shares.

Analyst John Inch says Tyco's results were within its $0.30-$0.33 guidance. He says the company's $9.4 billion in revenue was much stronger than his $9.1 billion estimate; more importantly, its $1.3 billion cash flow was above $800-$900 million guidance. Inch notes a press report that there may be a restatement by the company's ADT unit over the prior three quarters, but he believes the restatement likely to be within realm of expectations. He has a $25 price target based on sum-of-the-parts methodology. Inch notes the key risk is possible accounting irregularities that could be discovered during an internal forensic accounting investigation.

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