Citi cuts Ternium stock price target to $34, maintains Buy

On Wednesday, Citi analyst Alexander Hacking adjusted Ternium S.A. (NYSE:TX) stock’s price target to $34 from the previous $37 while maintaining a Buy rating. The revision reflects a decrease in the expected EBITDA for 2025 to $1.8 billion, a 9% reduction due to persistent market challenges in Mexico and Argentina. Currently trading near its 52-week low of $28.37, InvestingPro analysis suggests the stock is undervalued, with a robust current ratio of 2.89 and an attractive Price-to-Book ratio of 0.49. Despite a forecast of negative free cash flow due to peak capital expenditures of $2.5 billion, Ternium is still projected to end the year with net cash according to Citi’s analysis.

The analyst noted that the direct impact of U.S. steel tariffs on Ternium appears limited, as the company exports less than 10% of its production. Moreover, the U.S. exports over 3 million tons of sheet products to Mexico annually. However, concerns were raised over the potential broader impact on Ternium’s clients, particularly if tariffs extend to downstream industries like the automotive supply chain. The company maintains a strong financial position, with InvestingPro data showing an impressive Financial Health Score of "GREAT" and a notable dividend yield of 5.74%.

Ternium is currently engaged in a multi-billion-dollar reinvestment program, which hinges on the continued growth of Mexico’s industrial base. Despite the current headwinds, Citi’s stance on Ternium remains positive. The firm recognizes Ternium as one of the highest-quality steel companies in the world, trading at a significant discount. For a deeper understanding of Ternium’s valuation and growth prospects, investors can access comprehensive analysis and additional ProTips through InvestingPro’s detailed research reports. Nevertheless, Citi acknowledges that clear catalysts for stock appreciation are absent until there is more certainty regarding U.S.-Mexico trade relations.

In other recent news, Ternium reported a challenging fourth quarter for 2024, with earnings per share (EPS) of -$0.42, significantly missing the forecasted $0.84. The company’s revenue also fell short of expectations, coming in at $3.87 billion compared to the anticipated $4.3 billion. This earnings miss was attributed to lower steel prices and reduced shipment volumes, impacting the company’s financial performance. Despite these setbacks, Ternium continues to invest in expansion projects in Mexico and Argentina. The company has been working on a downstream expansion project in Mexico, including a cold rolling mill and a hot dip galvanized line, expected to commence operations by the end of 2025. In terms of analyst activity, there were no specific upgrades or downgrades reported in the recent news. Ternium’s management has expressed optimism about navigating trade challenges, particularly in the context of USMCA agreements. The company maintains a strong cash position, with net income for Q4 2024 reported at $333 million.

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