There are miles and miles of power transmission cables out there that need replacing. And then there are miles and miles of cable that will be needed for the eventual power needs of countries like India and China. I think that pretty much sums up the bull thesis on GeneralCable (NYSE:BGC).
Even though U.S. utility infrastructure work really doesn't seem to have begun in earnest yet, the fourth quarter was still a good one. Revenue rose about 12% on a metal-adjusted basis (that is, stripping out the impact of higher metal prices), and the company shipped about 8% more pounds of metal. Just so you don't get the wrong idea -- General Cable does sell wire and cable, not raw metal. It's just that the company reports volume through pounds of metal shipped, instead of through something like yards or miles of cable shipped.
Moving along, the operating margin improved more than a full point on an adjusted basis. And while reported net income was only half of last year's level, adjusting those numbers for certain items (like a tax benefit last year) shows that income actually more than doubled from the year-ago level.
Sooner or later, utility companies like Duke Energy (NYSE:DUK) and Southern Company (NYSE:SO) are going to start spending on infrastructure -- probably at some point after the government issues new reliability standards. And then you also have telecom companies like Verizon (NYSE:VZ) busily laying more cable and fiber to expand their business opportunities, as well. All in all, then, you can build a pretty robust picture for future demand.
Sure, competitors like Pirelli will get their share, and I would expect that high-tech superconducting wires from the likes of American Superconductor (NASDAQ:AMSC) and Intermagnetics General (NASDAQ:IMGC) will get a shot in some specific applications. But even with all that, I still like this conservatively managed power player in the cable market.
For related Foolishness:
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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).
