Sunday, December 9, 2018

Despite A Host Of Challenges, Ternium Is Holding Up

Predicting how investors will react to particular pieces of news can be difficult, and I look at Mexico’s Ternium (TX) as a case in point. You might think that weak demand in Mexico, an ugly situation in Argentina, and a struggling rebound in Brazil would all be pressuring the stock, not to mention the announcement that Steel Dynamics (STLD) is planning to build a large (3Mtpa) plant that will export to Mexico, would pressure the stock, but Ternium has held up better than many others in the steel sector, including Steel Dynamics, Nucor (NUE), POSCO (PKX), and ArcelorMittal (MT).

Even with this recent run of better (or at least “not as bad”) performance, the shares don’t look expensive. While the pricing concerns that trouble me with Nucor and Steel Dynamics do apply here as well, as does the concern about buying shares into what is likely to be declining EBITDA, I believe Ternium could return to growth sooner and that valuation is even less demanding.

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Despite A Host Of Challenges, Ternium Is Holding Up

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