Monday, October 26, 2009

Tough times at General Cable (BGC)

General Cable (BGC) beat earnings by 2cents this morning, but offered a dismal outlook.

BGC makes copper, aluminum and fiber optic cable products, used in various end markets including electric utilities, communications providers, and construction. As can be seen below, each segment showed big drops in revenue. Emerging markets held up better than North America and Europe, especially in terms of operating profit.

Looking to the fourth quarter, CEO Kenny sees continued difficulties, especially in areas where growth has gotten ahead of itself.
"In the U.S., we expect continuing declines in non-residential construction spending as well as a residential construction market that will recover slowly. These are direct or indirect end markets for many of our products. After over a decade of exceptional growth, Spain continues to suffer from a severe correction in their construction markets and nearly 20% unemployment. We do not expect that this market will return to growth quickly. Finally, with industrial companies in the United States using less electricity for the last two years, we do not expect electric utility spending on the distribution network to increase next year in any meaningful way."
The firm cut 4th quarter earnings guidance basically in half, to about 30cents per share. The shares are off 11%, trading at 34.00, so I'd say with the previous high near $80 this stock has discounted a decent amount of bad news. However having jumped almost 400% off the lows of last fall, the stock is likely dead money for a while.

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