Company Spotlight: General Cable (NYSE:BGC) Connecting the World
The Good: Very high Return on Equity The Bad: Housing market cutting demand for some products. The Beautiful: Global reach with strong international growth.
January 17, 2008 - General Cable Corp. (BGC-NYSE) helps all sorts of companies get wired for business. The company makes aluminum, copper, and fiber-optic wire and cable, including electric utility (cables used for low-, medium- and high-voltage power distribution and power transmission), electrical infrastructure (for industrial and commercial power and control applications), and telecommunications products (low-voltage signal wire for voice, data, video, and control applications). Brand names include Carol, BICC, and Helix/HiTemp. General Cable also produces power cables, automotive wire, mining cables, and custom-designed cables for medical equipment and other products.
The stock has been hit, like almost every other stock, in the last few weeks. After reaching an all-time high of $84.90 in late 2007, it's trading at a 34% discount to that now. Which way will it go next?
Most likely the company finished 2007 with good numbers, maybe records. Earnings for the fourth quarter are projected to be 72% above the fourth quarter of 2006, putting them at 98 cents a share. For the year, predictions are for $4.25, up from $2.41 in 2006. This is a company that reported 43 cents a share in 2004. Analysts predict over the next 5 years, earnings will grow at a healthy 29.5% annual average while revenues climb by 12.5% a year.
Demand for BGC's products is strong across the board. Medium and high voltage markets, both domestically and abroad, are showing strength. European electric utility and electrical infrastructure will most likely show the best growth in the international division. This year alone, that unit produced a 30% increase over last year. To aid international sales, the company bought Phelps Dodge International Corp. It should put another 8 cents a share to the bottom line in the fourth quarter of 2007 and add 40 cents a share in 2008.
One weak area of demand is the telecommunications market. Another is the low-voltage utility cable segment that serves the housing sector. Until housing sales increase, don't expect improvement here.
Some numbers: Market cap is $3.8 billion with 52.5 million shares outstanding. There are no dividends paid. Current ssets are about 1.9 times current liabilities with almost $500 million in cash. Debt is 52% of capital. Return on Equity was 34% in 2006, predicted to be 36% in 2007 and 29% in 2008. Sales were $3.66 billion in 2006 with anticipation of $4.35 billion in 2007 and $5.85 billion in 2008.
If you're looking for a stock that is well diversified, in products and markets, domestic and international, check out GBC. It's more like the picks and shovels sold in the gold rush days: a required basic to reach the promised wealth of the new digital age.
- Company Web site: www.biccgeneral.com
- Ted Allrich
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