Sunday, May 17, 2015

Seeking Alpha: Brazil's Ailing Economy Keeps Gerdau Under The Weather

As I recently discussed in an article on Mexico-centric steel company Ternium (NYSE:TX), I've been on the wrong side of the tape by liking Latin American steel companies and it has been even worse for the Brazilian companies. Growing Chinese exports have continued to weigh on global steel prices, but Brazil's economy hasn't improved since the election and weak civil construction and heavy manufacturing further undermined Gerdau's (NYSE:GGB) operations.

Like Ternium, I think there is long-term value in Gerdau. The company has a diversified production base (blast furnaces and mini-mills) and has been making investments to improve its vertical integration and skew towards more value-added products. Unlike Ternium, though, I see more challenges in Gerdau's biggest market and more operational risk. I do think Gerdau can trade higher over the long term, but it is harder for me to make a case that this is a must-buy today.

Follow the link to the full article:
Brazil's Ailing Economy Keeps Gerdau Under The Weather

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