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On Wednesday, UBS initiated coverage on Gerdau S.A. (GGBR4:BZ) (NYSE:GGB), a leading steel producer with a market capitalization of $5.7 billion, with a Neutral rating and a price target of R$20.00. According to InvestingPro analysis, the stock appears undervalued at its current price of $2.88. UBS highlighted Gerdau’s strong position within the Brazilian Materials sector, citing its geographic diversification, high-quality asset base, premium product portfolio, and experienced management team as key strengths.
Gerdau, which has significant operations in North America, contributing to approximately 50% of its EBITDA of $1.45 billion, is considered one of the few Brazilian companies that offer direct exposure to the U.S. market through the Ibovespa. The company maintains a healthy balance sheet with a current ratio of 3.01 and trades at attractive multiples with a P/E ratio of 7.69. Despite these positive attributes, UBS pointed out that the company’s "golden age" driven by its U.S. operations might be delayed due to a mixed demand outlook and persistent challenges facing the long steel business in Brazil.
The UBS analysis suggests that Gerdau’s stock is currently trading at fair value, with an estimated 3.7x enterprise value to EBITDA (EV/EBITDA) for the year 2025. The firm also expects the company to generate below-average free cash flow equity (FCFE) yields of 2-3%.
The rating reflects UBS’s view of the current market conditions and the company’s financial performance expectations. Gerdau’s position in the market and its financial outlook will likely be of interest to investors monitoring the steel industry and Latin American markets.
In other recent news, Gerdau S.A. reported its fourth-quarter results for 2024, maintaining its growth trajectory despite market challenges. The company’s latest SEC filing, a Form 6-K, highlighted its sustained performance, although specific growth figures were not disclosed. Additionally, Gerdau announced a strategic restructuring of its business segments, set to begin in the 2025 fiscal year, reflecting evolving business strategies. Alongside this restructuring, the company declared a dividend payment, though details on the amount and schedule were not specified. The filing also mentioned a capital expenditure investment plan, indicating a continued focus on growth and development. These developments were part of routine disclosures required for foreign private issuers like Gerdau, providing transparency into the company’s operations. Gerdau’s adherence to SEC regulations is underscored by its commitment to filing annual reports using Form 20-F. The company continues to ensure compliance with international reporting standards, keeping investors informed of significant corporate actions.
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