HSBC downgrades Gerdau stock rating on valuation concerns
HSBC has reduced its rating on Gerdau S.A. stock to "Hold" from "Buy" due to valuation concerns. The downgrade cites Gerdau's ability to supply steel to various industries and its exposure to the U.S. market as positive aspects. However, HSBC notes that the company's margins may be near their peak levels at the moment. Gerdau's EBITDA margin expanded to 25.7% in the second quarter of 2026, and the firm anticipates these margins to remain strong due to robust backlogs and stable metal spreads.
The stock is currently trading at a price-to-earnings ratio of 23.35 and offers a dividend yield of 3.53%. Over the past 35 years, Gerdau has maintained dividend payments in 35 consecutive years. Despite the downgrade, the company's fair value analysis suggests it may still be undervalued. Gerdau reported impressive second-quarter results for 2026, surpassing Wall Street expectations with adjusted earnings of $0.74 per share and revenue of $17.87 billion.
The company's strong performance in North America, driven by increased shipments and rising adjusted EBITDA, may support future growth.
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