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Is General Cable a Live Wire?

It's about time utility companies get off their duffs and start replacing their aging transmission infrastructure.

And that's not just my opinion. Numerous utility experts have spoken in the recent past on the need to upgrade nationwide. The federal energy bill passed recently speaks to some renewed expectations regarding quality and reliability. Should that actually happen, General Cable (NYSE: BGC  ) could be on the front end of a multiyear upgrade cycle.

General Cable isn't the kind of stock that I'd expect most people to pay too much attention to in most cases. It makes cable and wire primarily for the energy, industrial, and communications markets, and that's not generally a high-profile industry. Nevertheless, with a heightened focus on the need for new infrastructure, recent hurricane damage, and high prices for aluminum and copper, people might start paying more attention.

Third-quarter results suggest to me that business has started to improve. Total revenue rose nearly 23% -- about 11% if the increase in metal prices is netted out. Adjusted operating income rose about 41%, and similarly adjusted earnings per share rose about 18%.

Performance was strongest in the energy cable business, as revenue rose more than 19% (metal-adjusted) and margins expanded meaningfully. General Cable's other two business units saw adjusted revenue growth of 7%, with margins worsening a bit in industrial and improving in communications. While the industrial and energy cable units are the same size on a revenue basis, the energy business is more than twice as profitable.

Investors should also realize that higher metal prices don't directly impact this business much. The company sells lots of its products through contracts that include escalation clauses, as well as on the spot market. Of course, if prices get too high, customers might slow down orders as a result of budget constraints, which could ultimately affect General Cable.

Companies like Encore Wire (Nasdaq: WIRE  ) , Belden CDT (NYSE: BDC  ) , CommScope (NYSE: CTV  ) , and Anixter (NYSE: AXE  ) are in the general business of wire and/or cable. But those companies only compete with General Cable in some markets. In terms of the main attraction here, energy transmission, the company's competitors are more the likes of Pirelli and Sumitomo Electric.

General Cable isn't a bad company at all, but buying the shares today is very much a bet on increased infrastructure spending. I would say that seems likely today, but there are, of course, no guarantees. If that spending comes through, though, investors might be energized with the earnings growth they see.

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Fool contributorStephen Simpsonhas no financial interest in any stocks mentioned (that means he's neither long nor short the shares).

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