Security and protection services provider Tyco International Ltd. (TYC) is scheduled to report its first-quarter fiscal 2015 results before the market opens on Jan 30. In the last reported quarter, Tyco’s adjusted earnings exactly matched with the Zacks Consensus Estimate. Let’s see how things are shaping up for this announcement.
Key Factors in the First Quarter
Tyco recently inked a definitive agreement to acquire Texas-based gas & flame detection products manufacturer Industrial Safety Technologies from venture capital firm Battery Ventures for $329.5 million. The purported move will augment Tyco’s gas & flame detection capabilities across the globe and generate additional revenues.
With a strong presence across diversified markets in Europe, the Middle East, and the U.S. Gulf Coast region, Industrial Safety Technologies offers Tyco an increased market penetration for cutting-edge industrial safety solutions. The transaction is expected to generate annualized revenues of $140 million for Tyco.
At the same time, Tyco is augmenting its Internet of Things (IoT) capabilities by infusing proven technology and innovations into its existing product portfolio. Tyco has a long-serving IoT business that focuses on the retail market and delivers visibility and predictive capabilities for key insights into inventories, store traffic and customer behavior. These enable retailers to undertake justifiable steps to maximize revenue by optimizing inventory and deliver a memorable shopping experience.
Tyco's IoT platform collates data from traditional facilities-oriented systems and transfers them into valuable business intelligence system to perform advanced analytics and gain critical insight. Tyco is presently extending this IoT platform to incorporate more sensors, devices and applications to capitalize on the huge market potential of the IoT market.
According to data by research agency International Data Corporation, the global IoT market is likely to expand manifold to $7.1 trillion by 2020, as more and more people develop an affinity for full-time connectivity. The worldwide IoT installed base is expected to have a CAGR of 17.5% from 2013 to 2020 with a wide proliferation across the full breadth of the IoT ecosystem, including intelligent and embedded systems shipments, connectivity services, infrastructure, purpose-built IoT platforms, applications, security, analytics, and professional services. All these offer an exciting revenue-generating potential for Tyco.
Earnings Whispers
Despite the positive trends, our proven model does not conclusively show that Tyco is likely to beat earnings this quarter as it does not possess the key ingredients for a success recipe.
Zacks ESP: Expected Surprise Prediction or Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is currently pegged at 0.00%. This indicates a likely in line earnings.
Zacks Rank: Tyco’s Zacks Rank #3 (Hold) combined with a 0.00% ESP reduces the predictive power of an earnings beat for the company. Note that stocks with a Zacks Ranks of #1 (Strong Buy), #2 (Buy) and #3 coupled with a positive ESP have a significantly higher chance of beating earnings. The Sell-rated stocks (#4 and #5) should never be considered going into an earnings announcement.
Other Stocks to Consider
Here are some companies you may want to consider as our model shows that these have the right combination of elements to post an earnings beat this quarter:
Kemper Corp. (KMPR), earnings ESP of +2.78% and a Zacks Rank #3.
The Kroger Co. (KR), earnings ESP of +2.27% and a Zacks Rank #2.
Arch Capital Group Ltd. (ACGL) earnings ESP of +1.92% and Zacks Rank #1.
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