Resilient Construction Markets Build A Better-Than-Expected Quarter For Gerdau

One of the interesting phenomena from the COVID-19 pandemic so far is that non-residential construction markets have held up quite a bit better than expected (likely due to the fact that it's a largely outdoor vocation and it's easier to keep greater distances between workers). That, in turn, has supported relatively better markets for long products and better opportunities for Brazil's Gerdau (GGB).

I liked Gerdau back in May, and the stock has shot about 60% higher since then, performing far better than Mexico's Ternium (TX), global player ArcelorMittal (MT), and U.S. competitors like Nucor (NUE). Although I'm bullish on "catch-up" investment in Brazil's non-residential construction sector, not to mention the significant margin leverage that can come from better utilization in Brazil, I have my doubts about the U.S. non-resi sector and the valuation looks more than fair today at a time when many other steel companies seem to be trading at pretty wide discounts to typical trough valuations.

 

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Resilient Construction Markets Build A Better-Than-Expected Quarter For Gerdau