Company Overview - Gerdau S.A. (NYSE: GGB) has been identified as a company worth closer examination due to its various positive attributes, although current market conditions and valuation do not support a Buy recommendation at this time [1]. Investment Philosophy - The investment philosophy emphasizes that success in equity markets is derived from aligning investment approaches with personal strengths and analytical capabilities, rather than relying on extraordinary trading skills [1]. - The company adopts a realistic view of market performance, acknowledging the difficulty of consistently outperforming the S&P 500 benchmark, which leads to a significant portion of the portfolio being allocated to index funds while focusing active investments on selected opportunities [1]. Market Focus and Strategy - The focus is on identifying value opportunities, particularly in small and mid-cap sectors where market inefficiencies are prevalent [1]. - The strategy includes seeking industry leaders in out-of-favor sectors, quality companies facing temporary challenges, and businesses with strong balance sheets and robust cash generation [1]. Analytical Approach - The analytical approach prioritizes balance sheet strength from a credit perspective, near-term cash flow generation, next twelve-month earnings forecasts, and book value analysis, especially for financial sector investments [1]. Professional Background - The investment approach is supported by over 10 years of professional experience in financial sector consulting, specifically with banks, insurance companies, and payment firms, which aids in identifying overlooked opportunities [1].

Group 1 - The article expresses a beneficial long position in the shares of TLPFY, indicating a positive outlook on the company's stock performance [1] - The author emphasizes the importance of conducting due diligence and research prior to any investment, highlighting the risks associated with short-term trading and options trading [2] - The article clarifies that past performance is not indicative of future results, and no specific investment recommendations are provided [3]

Core Viewpoint - The recent surge in Gerdau's stock price and trading volume is linked to broader market optimism following the U.S. presidential election, particularly in the steel and industrial sectors, with potential implications from U.S.-China trade tariffs [1][2][5]. Company Summary - Gerdau's stock price is currently $3.38, with a 52-week range of $2.92 to $4.21 and a dividend yield of 2.66% [1]. - The stock experienced a rally of over 10% in a single day post-election, indicating strong market interest [1][2]. - Analysts have set a price target of $5.00 for Gerdau, suggesting a potential upside of 40.1% from current levels [6][8]. Trading Volume and Market Activity - Gerdau's average trading volume is 7.5 billion shares per day, but over 15 billion shares were traded the morning after the election, indicating heightened interest [2]. - The stock's trading volume spike is attributed to potential tariffs on Chinese exports, which may benefit Brazilian steelmakers like Gerdau [2][11]. Market Context and Demand - The Chinese government has increased economic stimulus measures, which could lead to higher demand for basic materials, potentially benefiting Gerdau [3][4]. - Gerdau's stock trades at a price-to-book (P/B) ratio of 0.8x, significantly lower than the materials sector average of 3.6x, indicating a discount and potential for growth [7]. Analyst Sentiment - Analysts from Bank of America and J.P. Morgan Chase believe Gerdau can deliver a double-digit rally, reinforcing bullish sentiment [5][6]. - The stock has a "Buy" rating among analysts, with a consensus forecast of $5.00, reflecting a 47.71% upside potential [8]. Industry Connections - The positive trading activity in Gerdau is mirrored by other stocks in the industrial sector, such as Stellantis, which also saw increased interest post-election [9][10]. - The reduction in short interest for Stellantis by 22.6% suggests a shift in market sentiment that could also positively impact Gerdau [10].

Financial Data and Key Metrics Changes - The company reported a net income of BRL1.432 billion, a significant increase of over 50% compared to the second quarter of 2024 [7] - Adjusted EBITDA for the quarter was BRL3 billion, reflecting cost reduction initiatives and asset optimization [5] - Free cash flow totaled BRL3 billion, with BRL1.8 billion attributed to the withdrawal of a judicial deposit related to tax calculations [7][8] - The company ended the quarter with a leverage ratio of 0.32 times net debt over EBITDA, the lowest in the last 12 months [8] Business Line Data and Key Metrics Changes - In Brazil, steel demand increased in the domestic market, although shipments were impacted by excessive steel imports [6] - Cost reduction initiatives in Brazil captured BRL210 million in savings during the quarter, contributing to improved results [10][34] - The North America business division faced temporary impacts on steel shipments and prices due to economic slowdown and election-related uncertainties [14][55] Market Data and Key Metrics Changes - The average monthly steel imports in Brazil for the first nine months of 2024 were nearly 80% higher than the historical average, affecting local shipments [6] - The construction industry in Brazil is expected to see a GDP growth of 4.8% in 2024, which is anticipated to drive steel demand [13] - In North America, the PMI has been negative since June, indicating slower industrial demand, which has affected merchant prices [22] Company Strategy and Development Direction - The company remains focused on cost discipline and capital allocation, with plans to continue capturing efficiency gains and cost reductions [12][38] - Gerdau is well-positioned to deliver solid results in the coming quarters, despite challenges from steel imports and market competition [12][38] - The company is actively engaging with the federal government to improve trade defense measures against steel imports [44][46] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the recovery of steel demand in North America following the recent elections, anticipating a rebound in economic activity [14][55] - The company highlighted the need for urgent adjustments to trade defense measures to effectively manage steel imports from China and other countries [44][46] - Management expects that the fourth quarter will typically see a reduction in volumes due to seasonality, but remains optimistic about 2025 [55][56] Other Important Information - The company executed around 57% of its buyback program year-to-date, investing over BRL700 million [9] - The cancellation of approximately 77% of repurchased shares was announced, reflecting a commitment to returning value to shareholders [9] Q&A Session Summary Question: Impact of U.S. market conditions on shipments and prices - Management acknowledged that the U.S. market is experiencing temporary impacts due to economic conditions and election uncertainties, but expects a positive outlook post-election [17][55] Question: Capital allocation strategy and buyback program - Management confirmed the continuation of the buyback program and emphasized the importance of maintaining a robust cash position for future investments [26][27] Question: Profitability outlook in Brazil and impact of imports - Management indicated that while imports are a concern, they expect profitability to improve in 2025 due to ongoing cost reduction initiatives and market demand [59] Question: Special steels demand in North America - Management noted that demand for special steels is expected to increase as interest rates decline and local production incentives are implemented [63][64] Question: Working capital performance and tax levels - Management expects a release of working capital in Q4 due to seasonal factors, while tax payments will vary based on country-specific schedules [71][73]

Financial Performance - Adjusted EBITDA for 3Q24 reached R$ 3.0 billion, representing a 14.9% increase compared to 2Q24 [1] - Total investments (CAPEX) in 3Q24 amounted to R$ 1.5 billion, with R$ 589 million allocated for Maintenance and R$ 920 million directed towards the Competitiveness of the Business Divisions [1] Shareholder Returns - A dividend distribution of R$ 0.30 per share, totaling R$ 619.4 million, will be paid based on the results of 3Q24 [2] - The share buyback program resulted in the repurchase of 39.6 million shares by the end of October 2024, amounting to R$ 729.4 million [2] Regulatory Filings - The company has filed its 3Q24 results with the Securities and Exchange Commission (SEC) and the Comissão de Valores Mobiliários (CVM), which are accessible on Gerdau's website [3]

G E R D A U S . A . C o n d e n s e d c o n s o l i d a t e d i n t e r i m fi n a n c i a l s t a t e m e n t s a s o f S e p t e m b e r 3 0, 2 0 2 4 E x h i b i t 9 9 . 1 GERDAU S.A. CONSOLIDATED BALANCE SHEETS In thousands of Brazilian reais (R$) (Unaudited) | | Note | September 30, 2024 | December 31, 2023 | | --- | --- | --- | --- | | CURRENT ASSETS | | | | | Cash and cash equivalents | 4 | 8,074,104 | 3,005,645 | | Short-term investments | 4 | 757,578 | 2,338,097 | | Trade accounts receivable | 5 | 5 ...

Core Viewpoint - Gerdau S.A. is positioned to benefit from ongoing investments in the automotive industry, electric vehicles, and electrical transmission renovations globally, indicating significant undervaluation in its stock price [3][26]. Company Overview - Gerdau S.A. is the largest Brazilian steel producer with over 100 years of experience in the industry, operating mills in multiple countries including Brazil, Canada, the U.S., and several Latin American nations [3][4][5]. - The company is also the largest recycling company in Latin America, which enhances its competitive position [5]. Financial Performance - In the last quarterly report, Gerdau reported an EPS GAAP of $0.07, beating expectations by $0.01, but revenue fell short by $10.55 million, totaling $2.94 billion [6][5]. - Analysts project revenue growth for 2026, 2027, and 2028, suggesting a positive long-term outlook [5]. Market Demand Drivers - Significant investments in electric vehicles and renewable energy are expected to drive steel demand, particularly in North America, Europe, and China [7][8]. - The automotive steel market was valued at approximately $112.93 billion in 2021, with a projected growth rate of over 3% from 2022 to 2030 [8]. Financial Health and Valuation - Gerdau has been reducing its total debt and liabilities, which has positively impacted its tangible book value per share [9][10]. - The company’s stock price is currently trading close to its book value per share, indicating potential undervaluation [10]. Cash Flow and Profitability - Gerdau has reported positive net income for the last six years and has maintained positive unlevered free cash flow, indicating a trend of increasing profitability [12]. - The company sold its equity interests in joint ventures for $325 million, which could enhance its cash position for future investments [13]. Currency Impact - The depreciation of the Brazilian real against stronger currencies could improve Gerdau's financials, as it receives payments in dollars and euros while incurring expenses in reais [14][15]. Debt Management - Gerdau's management has committed to maintaining a net debt/EBITDA ratio of 1.5x or lower, with a weighted average cost of debt around 5.4% [16]. Future Projections - Using a WACC of 15% and a perpetuity growth rate of 3%, the implied enterprise value is estimated at $15.75 billion, with a target stock price of $6.28 per share [20][22]. - Gerdau's valuation metrics indicate it is significantly undervalued compared to competitors, with a P/E ratio of 7.80 compared to a sector median of 18.53 [23].

Gerdau S.A. (NYSE:GGB) Q2 2024 Earnings Conference Call August 1, 2024 11:00 AM ET Company Participants Mariana Velho Dutra - Head, IR Gustavo Werneck - CEO Rafael Japur - CFO Conference Call Participants Daniel Sasson - Itau BBA Marcio Farid - Goldman Sachs Leonardo Correa - BTG Pactual Rafael Barcellos - Bradesco BBI Rodolfo De Angele - JPMorgan Carlos de Alba - Morgan Stanley Caio Ribeiro - Bank of America Ricardo Monegaglia - Safra Bank Lucas Laghi - XP Yuri Pereira - Santander Igor Guedes - Genial Mari ...

G E R D A U S.A. Condensed cons o l i d a t e d i n t e r i m fi n a n c i a l s t a t e m e n t s a s o f J u n e 3 0, 2 0 2 4 E x h i b i t 9 9.1 GERDAU S.A. CONSOLIDATED BALANCE SHEETS In thousands of Brazilian reais (R$) (Unaudited) | | Note | June 30, 2024 | December 31, 2023 | | --- | --- | --- | --- | | CURRENT ASSETS | | | | | Cash and cash equivalents | 4 | 4,889,466 | 3,005,645 | | Short-term investments | 4 | 1,749,547 | 2,338,097 | | Trade accounts receivable | 5 | 5,875,819 | 4,875,394 | | Inve ...

Gerdau (GGB) has been beaten down lately with too much selling pressure. While the stock has lost 19.7% over the past four weeks, there is light at the end of the tunnel as it is now in oversold territory and Wall Street analysts expect the company to report better earnings than they predicted earlier. reverse soon for reaching the old equilibrium of supply and demand. We use Relative Strength Index (RSI), one of the most commonly used technical indicators, for spotting whether a stock is oversold. This is ...