Gerdau (GGBR4): Shares Drop After Q2 2025 Results—Is Now the Time to Buy?

• Gerdau’s Q2 2025 Results: A Mixed Bag
• Why Are Gerdau’s Shares Falling?
• BTG’s Take: “A Decent Set of Results”
• Beyond Brazil: The North American Advantage
• Dividends and Valuation: What’s Priced In?
• FAQ: Your Gerdau (GGBR4) Questions Answered

Gerdau (GGBR4) reported its Q2 2025 results last Thursday, meeting market expectations. Despite solid numbers and a dividend announcement, shares fell nearly 4%. Analysts at BTG Pactual remain bullish, citing strong North American operations as a key driver. Is this a buying opportunity? Let’s dive in.

Gerdau’s Q2 2025 Results: A Mixed Bag

Gerdau (GGBR4) released its Q2 2025 earnings after market close on July 31, delivering figures largely in line with expectations. Highlights include:

• Net revenue of R$17.5 billion, up 1% quarter-over-quarter (QoQ) and 5% year-over-year (YoY).
• Net profit of R$864 million, a 14% QoQ increase but nearly flat YoY (R$867 million in Q2 2024).
• EBITDA of R$2.5 billion, up 7% QoQ but down 2% YoY.

The company also announced dividends exceeding R$300 million, payable on August 18. Yet, shares fell ~4% post-earnings. Why the disconnect?

Why Are Gerdau’s Shares Falling?

CEO Gustavo Werneck’s comments about reevaluating Brazilian investments due to rising import competition spooked investors. However, BTG Pactual’s analysts argue the market is overlooking Gerdau’s growing North American footprint, which now accounts for over 50% of EBITDA. "The stock trades like it’s purely a Brazilian play," they noted, emphasizing the U.S. unit’s resilience.

BTG’s Take: “A Decent Set of Results”

In their July 31 report, BTG analysts called Gerdau a "sector benchmark" despite challenges in Brazil. Key points:

• Debt concerns? Net debt rose to R$9.1 billion (from R$7.6 billion in Q1), but leverage remains manageable.
• Price target: R$20 (~23% upside from current levels), maintaining a "Buy" rating.

They see limited downside risk at current prices, calling the dip a potential entry point.

Beyond Brazil: The North American Advantage

Gerdau’s U.S. operations are now its profit engine, offsetting Brazilian headwinds. Steel demand in North America remains robust, with infrastructure spending and industrial activity driving growth. Meanwhile, Brazil’s market faces oversupply and import pressures—a trend unlikely to reverse soon.

Dividends and Valuation: What’s Priced In?

At ~5x EBITDA, GGBR4 trades below historical averages. The 4% dividend yield adds appeal, but investors must weigh:

• Pros: Strong U.S. exposure, attractive valuation, dividends.
• Cons: Brazilian uncertainty, rising debt, volatile steel prices.

FAQ: Your Gerdau (GGBR4) Questions Answered

Did Gerdau’s Q2 2025 results miss expectations?

No. Revenue, profit, and EBITDA met consensus, but guidance on Brazilian investments rattled markets.

Why is BTG Pactual bullish on GGBR4?

They highlight the U.S. division’s outperformance and believe the sell-off is overdone.

Is Gerdau’s dividend sustainable?

Likely yes, given steady cash flow. The payout ratio remains conservative at ~30% of net income.

What’s the biggest risk to Gerdau’s stock?

A downturn in U.S. steel demand or further Brazilian margin compression.