Gerdau Remains in Neutral Zone - Analyst Blog
19 Marzo 2012 - 12:15PM
Zacks
We recently maintained a Neutral
recommendation on Gerdau S.A. (GGB), one of the
leading steel producing companies in the world.
The steel making giant, Gerdau, is
the second largest long steel producer in the world and the largest
in the Americas.The company produced roughly 19.6 million tons of
crude steel (slabs, blooms and billets) and 16.4 million tons of
rolled products in the fiscal year 2011.
Moreover, with the global economy
recovering gradually, the steel industry is also looking up, and
showing signs of growth due to its link with infrastructure
investments. Government expenditures on infrastructure projects are
stepping up like never before in the emerging economies. The
Brazilian steel industry is positioned to leverage the rising wave
of worldwide infrastructural requirements and is also expected to
keep up with the demand growth in the short-to-medium term.
According to the World Steel
Association, global demand of steel is likely to increase by 5.4%
in 2012. Steel demand in China, the United States and India remains
at high levels. To cope with the rising demand from the emerging
economies of China, India, Japan as well as that of the United
States, Gerdau plans to invest roughly R$10.3 billion till 2016.
This looks quite promising for the company’s future growth
trail.
Gerdau in 4Q11 posted 12% and 16%
increase in net earnings and revenue, respectively. Shipments were
strong; while crude steel production went up 8% year over year,
benefiting largely from higher demands from operating regions.
However, the positive momentum gets
a setback from higher raw material costs, which still remain a
concern for the company. Moreover, eurozone debt crisis, downtrend
in the Chinese economy and risk of recession in US force us to stay
on the sidelines. To add to the peril, growth gets restricted due
to headwinds arising from foreign currency fluctuation, cyclicality
of the industry and stiff competition from its peers including
other major steel majors like Companhia Siderurgica
Nacional (SID) and Arcelor Mittal
(MT).
The current Zacks Consensus
Estimate for the first quarter is 30 cents, representing a year-
over-year growth of 87.50%. Estimate for the fiscal year 2012 and
2013 is 77 cents and $1.14, with growth of roughly 6.94% and
48.05%, respectively.
GERDAU SA ADR (GGB): Free Stock Analysis Report
ARCELOR MITTAL (MT): Free Stock Analysis Report
CIA SIDERUR-ADR (SID): Free Stock Analysis Report
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