No Brownouts in General Cable's Growth

Infrastructure plays are still hot across the board, and one of the hottest continues to be General Cable (NYSE: BGC). In the decidedly boring business of manufacturing cables for the power, industrial, and communications markets, this once-small company is posting some decidedly not-boring results these days.

Revenue for the second quarter rose 62% on a reported basis and just about reached $1 billion. It's worth digging in deeper, though, as metal-adjusted revenue was up 19.4% and total pounds sold rose about 22%, with a bit more than half of that coming from acquisitions. Margins continue to improve as well, and the company posted very strong leverage throughout the income statement.

General Cable is seemingly most often thought of first and foremost as a power cable company, where it competes with the likes of Alcan (NYSE: AL) and a host of companies that most Fools likely have never heard of (Prysmian, Nexans, and so forth). Certainly this market has favorable trends: The power grid is old and needs replacing. By the same token, while companies like Ameren (NYSE: AEE) apply for rate relief to cover upgrades, companies like NRG (NYSE: NRG) and TXU (NYSE: TXU) are looking to build new plants.

The industrial side is, in my opinion, underappreciated. It's difficult to do it justice in one paragraph because the company sells so many different kinds of cable and wire, but I'd point out that energy companies are among the buyers of cable, and exploration and drilling activity has been robust lately and looks to stay strong for a while.

Looking at General Cable's business and stock, I don't really see much risk that demand from power generation and the industrial side is going to fall off, particularly as companies like ABB (NYSE: ABB) and Siemens (NYSE: SI) continue to see growing order books for worldwide projects that will ultimately need cable. Moreover, superconducting wire from the likes of American Superconductor (Nasdaq: AMSC) just isn't close enough to practicality to be a threat.

What does concern me some is the nature of metal prices. General Cable generally passes through metal price increases, but I'm not entirely sure what will happen when metal prices start to fall again. Underlying market demand and internal margin improvements will likely make that a temporary disruption, but any sort of disruption to a stock perceived as cyclically or commodity-sensitive could put the stock on the skids in the short run.

For more related Foolishness:

• General Cable Plugged Into Growth
• Is NRG Repeating Mistakes of the Past?
• Can American Superconductor Break Loose?

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Fool contributor Stephen Simpson has no financial interest in any stocks mentioned (that means he's neither long nor short the shares).