Tyco Gets Leaner As The Company Moves On From Its Former CEO's Conviciton

Former Tyco International TYC CEO, Dennis Kozlowski was convicted of using Tyco's funds, as his own. For many investors, this rain cloud has been over their head for years. Now that Tyco has cleaned up its act, bulls have come out and said that Tyco is a leaner industrial machine, scandal free with an iron-clad balance sheet and a portfolio of operations geared to generate higher sales and profits the deeper we get into the economic recovery, according to a recent Barron's report. Shares of Tyco have recently hit a high of $45 and analysts say that it could reach at least $60 over the next 18 months pending solid quarterly results, portfolio restructuring, and stock buybacks. The industrial sector as a whole has seen significant gains over the past year. Tyco's share price surge has been accompanied by GE GE and United Technologies UTX. Barron's adds that Tyco has underperformed and investors are unimpressed by the expected 3% organic growth this year, which is below its peers. Tyco operates through three segments: security systems (which include the ADT brand), fire protection, and flow control. Tyco's markets are quite large and could see serious growth potential in the future. Analysts estimate that as much as 20% of Tyco's operations are linked to North American construction activity, which has risen to its highest level in the past 3 years, according to the Architecture Billings Index. This bodes well for Tyco because it has more exposure to commercial construction than some of its competition. Tyco recently showed its strength when it easily surpassed its first quarter earnings estimates. The results showed a 29% profit increase in the security business based on growing demand from commercial customers. Tyco posted $0.75/share that quarter which is up from $0.64/share a year ago. Barron's adds that Sterne Agee analyst Nicholas Heymann recently picked Tyco as his top industrial pick for 2011 saying that, "fundamental recoveries in all of Tyco's key end markets are now poised to emerge in fiscal 2011 and further build throughout fiscal 2012 and there hasn't been a better time to own Tyco in recent memory." TYC is trading higher at $45