Tyco International Ltd. (TYC): ADT Corp (ADT) Must Find a Way to Reverse This Trend

ADT Corp (NYSE:ADT) is the largest security company in North America, with approximately 6.5 million customers. Being the largest company in any industry is a plus, as it often means a strong market-share position. However, it doesn’t guarantee that the company is heading in the right direction.

A happy separation
Last year, Tyco International Ltd. (NYSE:TYC) separated into three different companies: ADT Corp (NYSE:ADT), Pentair , and Tyco International Ltd. (NYSE:TYC). The goal was for each company to establish industry-leading positions and unlock more value for shareholders. ADT Corp (NYSE:ADT) is up approximately 2% year to date, which isn’t anything to get excited about, but at least it yields 1.20%. Tyco International Ltd. (NYSE:TYC) and Pentair are up approximately 19% and 28% year to date, respectively, and they yield 1.80% and 1.60%. Tyco International Ltd. (NYSE:TYC) is now focused on global commercial fire and safety, and Pentair offers services for waters and fluids. 

Tyco relies heavily on commercial construction, and it has positioned itself in emerging markets. The company’s strong cash position and cash flow capabilities should allow it to grow organically. However, it can also grow inorganically through acquisitions. For instance, it recently acquired Exacq Technologies, a video management systems company, for $150 million in cash. Tyco expects this acquisition to add $75 million in annual revenue. At this point in time, you might be considering an investment in Tyco International Ltd. (NYSE:TYC) without even bothering to read about ADT Corp (NYSE:ADT), but that wouldn’t be a recommended course of action. Before we get to ADT Corp (NYSE:ADT), let’s first take a quick glance at the other separated company, Pentair.

Pentair has positioned itself in high-growth areas, especially India, China, and Brazil. With the increasing infrastructure needs in these countries, this should pan out well for the company. Additionally, Pentair has a strong history of positive earnings surprises and dividend hikes, both of which investors appreciate. Additionally, Forbes recently rated Pentair 96 of 100 on its 2013 “100 Most Innovative Companies” list. With 1,300 engineers with various backgrounds and expertise, as well as 800 U.S. patents, this ranking seems to be justifiable. It’s possible ADT Corp (NYSE:ADT) is even more appealing, even if for different reasons, but that’s not a promise.