Seeking Alpha: Skepticism Weighs Heavily On Ternium

This has been a doubly frustrating year for Ternium (NYSE:TX), as this Latin American steel company has languished alongside other steel producers like ArcelorMittal (NYSE:MT) and Gerdau (NYSE:GGB) while Nucor (NYSE:NUE) and U.S. Steel (NYSE:X) have enjoyed better years. I say doubly frustrating, as although many Latin American industrial companies have done fairly well, worries about the economic situations in Argentina and Brazil have sapped investor enthusiasm.

While I liked the shares six months ago, they have fallen another 10% since then and a sizable second quarter EBITDA miss did not help. I still believe that Ternium is well-placed to benefit from Mexico's growing auto sector and improving spending on construction and energy. Likewise, I believe the eventual exploitation of Argentina's sizable energy reserves will support steel demand there. That all sounds nice, but the "when" is very much in doubt and the prospect of weak steel prices fueled by low iron ore prices and weak Brazilian demand is real. Ternium seems undervalued on what I believe are trough multiples to 12-month EBITDA, but the prospect of further downward revisions cannot be ruled out.

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Skepticism Weighs Heavily On Ternium