Looking for the dark side of the recovery in commodity prices?  Look no farther than the second quarter earnings reported by General Cable (BGC) on August 5.

The company did indeed beat Wall Street earnings estimates by 20 cents a share but that doesn’t mean that earnings were actually good in the quarter. Adjusted earnings in the quarter fell to $1.02 a share from $1.37 in the second quarter of 2008. Operating income dropped 35%.

Revenue came up short of projections at $1.13 billion instead of the $1.21 consensus. That was a drop of 17% from the second quarter of 2008.

But the worst was yet to come. 

The company told investors to expect just 45 cents to 55 cents in earnings per share in the third quarter instead of the 72 cents a share Wall Street was looking for. Revenue will drop too, but not nearly as sharply: The company expects to miss Wall Street revenue estimates for the quarter by $80 million to $130 million.

Why the much bigger drop in earnings than in revenue? That’s where the dark side of the commodities rally comes in. As a maker of all kinds of cable, General Cable is a huge buyer of copper. And copper prices have been on a tear in 2009.

Copper sold for roughly $1.50 a pound at the beginning of the year. The metal had tacked on about 50 cents a pound, a 33% increase, by May. And recently on heavy buying from China and heavier speculation that Chinese buying meant the global economic recovery was at hand, it climbed another 75 cents a pound to close at $2.75 on August 6.

That’s a move of $1.25 a pound or 83% in less than eight months.

No way that General Cable could pass much of that on to its customers that quickly. Even if the global recovery is just around the corner, General Cable’s customers are still struggling to sell their product at current prices. A price hike big enough to cover the company’s costs would dry up orders overnight.

So the company will eat a good percentage of the jump in raw materials and wait for a return to economic growth–or a decline in copper prices as speculative fever subsides–to bring margins and earnings back up.

Fortunately, for long-term investors–and this stock is one of the 50 long-term picks in my book The Jubak Picks–General Cable has managed through commodity booms and busts  before. Despite a U.S. recession and a global slowdown, the company managed to stay on the right side of cash flow (Operating cash flow hit $152 million in the second quarter) and to actually reduce its debt load by about 10% in the quarter.

With that kind of financial base the company has been able to continue its strategy of building market share through acquisition. Nothing as big as the buy of the cable business of Freeport McMoRan Copper and Gold (FCX). That was a before the recession deal. This past quarter General Cable acquired Gepco International, a maker of high-end broadcast cable products.

(Full disclosure: I own shares of General Cable in my personal portfolio.)