Tyco International (TYC): Shares defining bullish 'flag' pattern

Tyco International (NYSE: TYC) is a leading provider of security products and services, fire protection and detection products and services, valves and controls, and other industrial products. The firm has operations in more than 60 countries, employing 118,000 worldwide. Customers include commercial and shipping enterprises, governmental entities, military forces, transportation systems, original equipment manufacturers, engineering contractors and homeowners. General Electric (NYSE: GE) and Honeywell International (NYSE: HON) are major competitors.

The company pleased investors last week, when it guided fiscal Q1 revenues to $4.87 billion. Analysts had been expecting $4.75 billion. The CEO noted strong operational performances across all business units. Management also boosted FY08 EPS guidance to $2.60-$2.70. That was up from a previous estimate of $2.50-$2.65 and compared well with the consensus Street view of $2.60. UBS subsequently reiterated its 'buy' rating on the issue. TYC shares popped on the news and have since moved into a bullish 'flag' consolidation pattern. Prices frequently exit flags moving in the same direction they were traveling on entry. In this case, that would be to the upside.

Brokers recommend the stock with six 'buys,' four 'holds' and one 'underperform.' Analysts see a 27% average annual growth rate through the next five years. The TYC Price to Sales ratio (0.98), Price to Book ratio (1.18) and Price to Free Cash Flow ratio (7.50) compare favorably with industry, sector and S&P 500 averages. Institutional investors hold about 88% of the outstanding shares. The stock is one of those used to calculate the S&P 100 and S&P 500 Indexes. Over the past 52 weeks, it has traded between $31.01 and $55.17. A stop-loss of $32.40 looks good here. Note that the firm is expected to release Q1 results on February 5th, before the open.

Larry Schutts is a contributing editor for Theflyonthewall.com and the Vice-President of Stockwinners.com. He does not hold positions in any of the stocks mentioned above.