Although Encore Wire (Nasdaq:WIRE) has survived the residential construction market meltdown, it may see further weakness from exposure to the commercial and industrial construction markets. Encore Wire manufactures copper wire and cable used in residential, industrial and commercial construction. The company offers 6,000 products and sells mostly to wholesale distributors. (Find out how the everyday items you use can affect your investments; read Commodities That Move The Markets.)
EPS Increased in Third Quarter
In Encore Wire's earnings report for the third quarter ending September 30, revenues declined slightly year over year to $296.3 million, while earnings per share increased from 24 cents to 34 cents. Encore was able to increase earnings with strong price increases for its products during the quarter. The company has a strong balance sheet, with cash at $108.5 million and long-term debt at $101 million. (For more on deciphering this financial statement, check out Reading The Balance Sheet.)
Low-Cost Producer
Encore’s strategy is simple: It wants to be the lowest-cost producer in the industry, and it tries to accomplish this in several ways. The company is fully integrated and owns a copper mill and a plastic mill. It can also recycle scrap copper created in the manufacturing process and reuse it. Encore’s competitors that are not fully integrated would need to buy finished copper rods from producers like Freeport-McMoRan Copper & Gold (NYSE:FCX) and Southern Copper (NYSE:PCU).
