Ternium Brings Strong Execution To A Strong Market

A better-than-expected steel market over the past 12-18 months has added a welcome tailwind to a story I already liked at Ternium (NYSE:TX). Although cost creep and higher working capital needs have created some near-term concerns, Ternium management has continued to do a good job managing overall profitability, while also intelligently re-investing for growth. That, in turn, has led to okay share price performance over the last year - the 22% rise in the shares, outperforming the S&P and Nucor (NYSE:NUE), but coming up a little short next to Steel Dynamics (NASDAQ:STLD), ArcelorMittal (NYSE:MT), and Gerdau (NYSE:GGB).

I don’t expect the steel market to improve as much from this point, but I still see opportunities for better results from Ternium. The CSA acquisition and internal greenfield opportunities offer volume growth opportunities, and a revised ownership agreement for Usiminas (OTC:USNMY) should allow for ongoing exposure to Brazil’s recovery. With a fair value in the mid-to-high $30s, there still appears to be value in Ternium shares even as the NAFTA renegotiation process drags on.

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Ternium Brings Strong Execution To A Strong Market