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Revenues increased 4.2% Y/Y, or 7% when adjusted for lower metals prices. Given the tough commodity environment and still reluctant capital investment environment, HWCC is performing really well.

The long thesis has been working well so far as HWCC was able to remain resilient despite strong metals price headwinds and still uneven recovery in some regions.

I reiterate my long thesis and confirm my target price at $14.80, giving the stock a ~20$ upside within two years plus the 4% annual dividend yield.

Houston Wire & Cable Company (NASDAQ:HWCC) reported record Q2 2014 sales and margins (SEC filing, press release, conference call). Sales rose 4.2% Y/Y, or 7% when adjusted for falling metals prices and 4% sequentially. The strong revenue reflects continued execution strength in regions where end markets have recovered, despite some regions remaining sluggish. Also, growing strength comes from the project activities although margins here have been under pressure due to a competitive environment. In terms of segments, maintenance, repair and operations sales increased 2% or approximately 5% on a metals adjusted basis. The CEO summed up well where the strength in this segment came from: "Improved market conditions in the Midwest and continued end market recovery in the Eastern regions as well as steady demand in oil and gas markets were the primary contributors to these results." Project business increased 8% or approximately 11% on a metals adjusted basis over the prior year quarter. Industrial and market demand, primarily led by improving Midwestern markets and regions with steady activity in upstream, midstream oil and gas transfer storage and infrastructure were the major drivers of the results in this segment.

The new product initiatives, including specialty oil and gas cables and aluminum cables, continued to contribute to top line. The overall gross margin decreased slightly to 21.7% due to competitive pricing and the impact of lower metals prices. Net income of $4.0M was flat Y/Y and EPS reached $0.23. HWCC raised quarterly dividend from $0.11 to $0.12 per share, up 9% Y/Y for a forward yield of ~4%. Stock repurchases also continued. In terms of forward guidance, HWCC continues to see low single-digit revenue growth and mid to high single-digit earnings growth for the full year, confirming the previous guidance and showing continued resilience despite metal pricing headwinds and sluggish recovery in some regions.

My original thesis, which was most recently updated in June, continues to work well. After these positive Q2 results, I am reiterating my latest fair value estimate of $14.80 per share, giving HWCC a ~20% upside within two years plus the dividends, currently yielding 4% annualized. I consider HWCC to be a strong long-term investment. Continued commodity weakness may pose a near-term threat to the stock price.

Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.