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Gerdau (NYSE:GGB) +3.7% in Monday’s trading as J.P. Morgan upgraded shares to Overweight from Neutral with a $6 price target, raised from $5, seeing this year as an inflection point following a very challenging 2023.
JPM’s Rodolfo Angele believes Q1 should mark the bottom of Gerdau’s (GGB) Brazil earnings results, expecting domestic markets to stabilize, and the bulk of the pain from imported material from China already was felt in 2023.
The analyst also sees North America with a solid performance during 2024 and in the long term, keeping margins at double digits, and management is proactively acting on levers to improve free cash flow generation – an ambitious cost cutting program was launched and if necessary, non-critical capital spending can be delayed as well.
Finally, Angele thinks valuation looks attractive in terms of profitability, with the company trading at 4.2x and 3.7x EV/EBITDA for 2024 and 2025, respectively.
