General Cable Corp.: Pull-back is buy opportunity

Posted Nov 17th 2009 5:30PM by Joseph Lazzaro
Filed under: Stocks to Buy

Based on its decent Q3 performance and the 2010 outlook for the U.S./global economies, I'm reiterating my buy rating for General Cable Corporation (BGC), first recommended on May 5, 2009, at a price of $34.59.

General Cable, which develops, designs, manufactures, and distributes copper, aluminum, and fiber optic wire and cable products for the communications, energy and electrical markets, reported Q3 EPS of 55 cents, above the First Call Q3 EPS estimate of 53 cents. However, General Cable gave up yearly gains because it announced a Q4 production cut -- one that will likely weigh on Q4 earnings.

Still, view the dip to about $33 from $39 as a buy opportunity, on the argument that demand for copper, aluminum, and fiber optic wire and cable products will rebound in the year ahead, first in emerging markets, then in the second half of 2010 in the U.S. The First Call FY2009/FY2010 EPS estimates for BGC are $2.85 to $2.49.

One qualifier: Don't buy GBC if you're looking to flip the shares in less than six months: BGC is a 1 to 3 year play.

Stock Analysis: General Cable Corp. is a moderate-risk stock. If you've already purchased the company's shares, hold them. If not, consider buying a 25% position in GBC now; then buy another 25% in one month, if U.S. and global economic conditions don't worsen substantially. Under any circumstance, don't buy more than 50% of your GBC position before December 2009. Sell/stop loss if you were to buy shares in this company: $28.

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Disclosure: Lazzaro has no positions in stocks, but does own shares in two Pimco Bond Funds: PHDAX and PYMAX.

Tags: BGC, copper cable, electrical cable, fiber optic cable, General Cable Corp.