Financial Survey: Ternium (NYSE:TX) versus Gerdau (NYSE:GGB)

Ternium (NYSE:TX) and Gerdau (NYSE:GGB) are both mid-cap basic materials companies, but which is the better business? We will contrast the two businesses based on the strength of their earnings, risk, valuation, profitability, analyst recommendations, institutional ownership and dividends.

Dividends

Ternium pays an annual dividend of $3.60 per share and has a dividend yield of 10.2%. Gerdau pays an annual dividend of $0.08 per share and has a dividend yield of 2.5%. Ternium pays out 118.8% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Gerdau pays out 27.6% of its earnings in the form of a dividend.

Valuation and Earnings

This table compares Ternium and Gerdau”s gross revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Ternium	$17.65 billion	0.40	-$53.67 million	$3.03	11.67
Gerdau	$12.43 billion	0.52	$846.59 million	$0.29	11.21

Gerdau has lower revenue, but higher earnings than Ternium. Gerdau is trading at a lower price-to-earnings ratio than Ternium, indicating that it is currently the more affordable of the two stocks.

Profitability

This table compares Ternium and Gerdau’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Ternium	3.66%	1.95%	1.35%
Gerdau	4.81%	6.51%	4.29%

Institutional and Insider Ownership

12.0% of Ternium shares are held by institutional investors. Comparatively, 1.5% of Gerdau shares are held by institutional investors. 0.0% of Ternium shares are held by company insiders. Comparatively, 0.0% of Gerdau shares are held by company insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a company will outperform the market over the long term.

Risk and Volatility

Ternium has a beta of 1.52, suggesting that its stock price is 52% more volatile than the S&P 500. Comparatively, Gerdau has a beta of 1.42, suggesting that its stock price is 42% more volatile than the S&P 500.

Analyst Recommendations

This is a breakdown of current ratings and target prices for Ternium and Gerdau, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Ternium	2	3	2	0	2.00
Gerdau	0	2	1	0	2.33

Ternium presently has a consensus target price of $32.67, suggesting a potential downside of 7.59%. Gerdau has a consensus target price of $3.80, suggesting a potential upside of 16.92%. Given Gerdau’s stronger consensus rating and higher possible upside, analysts plainly believe Gerdau is more favorable than Ternium.

About Ternium

Ternium S.A., together with its subsidiaries, manufactures and distributes steel products in Mexico, Southern Region, Brazil, and internationally. It operates through three segments: Steel, Mining, and Usiminas. The Steel segment offers slabs, hot and cold rolled products, coated products, roll formed and tubular products, bars, billets, and other products. Its Mining segment sells iron ore and pellets. The Usiminas segment offers iron ore extraction, steel transformation, and production of capital goods and logistics; and manufactures and sells various products and raw materials, such as flat steel, iron ore, and stamped steel parts for the automotive industry and products for the civil construction and capital goods industry. It also provides medical and social; scrap; renewable energy; and engineering and other services, as well as operates as a distribution company. In addition, the company engages in the exploration, exploitation, and pelletizing of iron ore. Ternium S.A. was founded in 1961 and is based in Luxembourg City, Luxembourg. Ternium S.A. is a subsidiary of Techint Holdings S.à r.l.

About Gerdau

Gerdau S.A., together with its subsidiaries, operates as a steel producer company. The company operates through Brazil Business, North America Business, South America Business, and Special Steel Business segments. It also provides semi-finished products, including billets, blooms, and slabs; common long rolled products, such as rebars, wire rods, merchant bars, light shapes, and profiles to the construction and manufacturing industries; drawn products comprising barbed and barbless fence wires, galvanized wires, fences, concrete reinforcing wire mesh, nails, and clamps for manufacturing, construction, and agricultural industries; and special steel products used in auto parts, light and heavy vehicles, and agricultural machinery, as well as in the oil and gas, wind energy, machinery and equipment, mining and rail, and other markets. In addition, the company offers flat products, such as hot-rolled steel coils and heavy plates; and resells flat steel products. Further, it operates mines that produce iron ore located in the Brazilian state of Minas Gerais. The company sells its products through independent distributors, direct sales from the mills, and its retail network. Gerdau S.A. was founded in 1901 and is based in São Paulo, Brazil.