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On Wednesday, UBS initiated coverage on Ternium S.A. (NYSE:TX), a leading Mexican and Latin American steelmaker with a market capitalization of $6.25 billion, with a Neutral rating and a price target of $32.00 per American Depositary Share (ADS). According to InvestingPro data, the company offers an attractive dividend yield of 11.31% and maintains strong liquidity with a current ratio of 2.89. The UBS analyst praised Ternium for its high-quality asset base, extensive downstream reach, strong cost position, geographical footprint, and experienced management team.
Ternium’s global recognition as one of the best steel operators is attributed to these factors. Despite these strengths, Ternium and the Mexican market face uncertainty due to the potential enforcement of tariffs by the United States. The UBS analyst pointed out that while net imports of steel from Mexico to the U.S. have been close to zero in recent years, the ongoing threat of tariffs could negatively impact Mexico’s overall economic activity and weigh on Mexican equities.
The UBS coverage does not factor in the effects of potential higher U.S. tariffs but considers Ternium’s stock to be fairly valued at an enterprise value to earnings before interest, taxes, depreciation, and amortization (EV/EBITDA) multiple of 3.1 times. The setting of the price target at $32 reflects the analyst’s view of the company’s current market position and the external risks it faces.
In other recent news, Ternium S.A. reported a challenging fourth quarter of 2024, with earnings per share of -$0.42, significantly missing the forecast of $0.84. The company’s revenue also fell short, coming in at $3.87 billion against an expected $4.3 billion. Despite these setbacks, Ternium maintained a strong cash position and continued its investment in expansion projects across Mexico and Argentina. Citi analyst Alexander Hacking adjusted Ternium’s stock price target to $34 from $37, maintaining a Buy rating, while noting market challenges in Mexico and Argentina. The analyst highlighted Ternium’s limited exposure to U.S. steel tariffs but raised concerns about potential impacts on its clients if tariffs extend to downstream industries. Ternium’s ongoing multi-billion-dollar reinvestment program in Mexico aims to capitalize on the region’s industrial growth, though uncertainties in U.S.-Mexico trade relations remain a concern. The company expects a slight increase in EBITDA for the first quarter of 2025, with stable shipment volumes and declining costs as part of its strategic focus on operational efficiency and regional supply chain strengthening.
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