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Bear of the Day: General Cable (BGC)

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Disappointing results and downbeat guidance have led to sharp downward estimates revisions, sending this wire and cable products company to a Zacks Rank # 5 (Strong Sell).

About the Company

Headquartered in Highland Heights, Kentucky, General Cable develops, designs, manufactures, markets and distributes copper, aluminum and fiber optic wire and cable products for the energy, industrial, specialty and communications markets around the world.

Disappointing Results and Guidance

The company has disappointed its investors with negative earnings surprises in each of the last four quarters. 

Last quarter’s results were hurt mainly by foreign currency transaction losses and a higher-than-expected effective tax rate. Weakness in Europe and Latin America operations also impacted the performance. While condition in Europe and Mediterranean region remained challenging, continued political and economic uncertainly hurt operations in Venezuela.

However, results in the company’s North America business were stable despite the impact of declining metal prices 

Debt increased sharply from the previous quarter, leading to a relatively higher debt to equity ratio compared with the industry peers.

The company also revised down their current quarter and full year outlook. They now expect adjusted operating income in the range of $70 million to $80 million and adjusted earnings of 0.50 to $0.60 per share.  Lower guidance was a result of higher inventory costs and weaker metal prices.

Downwards Revisions

Due to disappointing results, quarterly and annual estimates have been revised sharply downwards in the past few days by analysts.

Zacks consensus estimate for the current quarter now stands at $0.56 per share versus $0.82 per share, 30 days ago, while the full-year consensus estimate is $2.56 per share now, down from $2.70 per share.

The Bottom Line

We expected that company’s results for the second and the third quarter will continue to be impacted by lower metal prices and weakness in Europe.

BGC is currently Zacks Rank # 5 (Strong Sell) stock and it also has a longer-term recommendation of “Underperform”.  

Given above reasons, we would advise the investors to stay away from this stock for the time being.

Better Play

Investors looking for exposure to the industry (Wire and Cable Products) can consider Insteel Industries (IIIN)—a Zacks rank #1(Strong Buy) stock. The company has delivered strong positive surprises in the last two quarters.

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