Gerdau (GGBR4)

Equity Research 23 August 2026 | 9:15PM BRT

Gerdau (GGBR4.SA): Earnings Momentum Takes a Pause; Down to Neutral

Since the beginning of the year, we have revised Gerdau earnings upwards by 20% Marcio Farid | for 2026-27, with GS EBITDA for 2027 at GSe R$13.9B (vs BBG consensus at Goldman Sachs do Brasil CTVM S.A. R$13.1B), and this is 25% higher vs. what we would consider normalized profitability. Emerson Vieira The stock has also outperformed (+11% vs. IBOV +6% YTD). | Goldman Sachs do Brasil CTVM S.A. We now think a continuation of earnings upside is more limited, especially because Henrique Marques current profitability levels are already attracting imports in the US (suggesting a price | cap), new long steel capacity comes online in Mexico in 4Q26 and as Brazil upside is Goldman Sachs do Brasil CTVM S.A. limited as weaker demand offsets potential cost gains related to mining ramp up in 2027.

Additionally, the US pricing and premiums have been supported by an aggressive trade policy that basically includes 50% tariffs for every product and producer globally. A potential change of that policy could add downside risk. More specifically, Mexico has been ramping up trade protection in order to be better positioned to negotiate a reduction in steel imports tariffs with the US (link, link).

With earnings revisions being mostly done for this cycle and with the current valuation level already pricing in a lot of the excess earnings (above normal), we downgrade Gerdau to Neutral. Since added to the Americas Buy List on February 2, 2024, shares of GGBR are +37%vs Ibovespa 35%.

We do note, however, that Gerdau’s North America earnings remains representative of the consolidated EBITDA (76%-65% in 2026-28) and the stock is trading at 50% discount to peers. A potential re-rate is an upside risk, but we do not expect that to materialize in the current environment.

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Goldman Sachs Gerdau (GGBR4.SA)

Peaking profitability in the US operations, while Brazil loses momentum; downside risks going into 2027 Gerdau’s US operations have come to Exhibit 1: Gerdau’s LTM EBITDA breakdown represent c.75% of the company’s EBITDA in the LTM on a combination of good 7% -3% operating execution, solid sales volumes 22% (market share gains over imported material, Brazil North America robust demand from non-residential South America Others/eliminations construction/renewable energy/data 74% centers) and supportive pricing amid Section 232 steel tariffs (50% effective since June 2025). Source: Company data, Goldman Sachs Global Investment But we see increasing signals that we are Research near peak profitability for North America with downside risks going into late-26/2027.

1) We believe upwards earnings revisions are close to a peak as US earnings momentum could decelerate and Brazil deteriorates in late 26-2027 Since the beginning of the year, we have revised Gerdau earnings upwards by 20% for 2026-27, with the bulk of this coming from stronger North America operations (+60% FY26-27 EBITDA revision) more than offsetting weaker earnings in the Brazil operations (30% downward revision). Now, we stand at R$13.9B EBITDA for 2027 (vs BBG consensus at R$13.1B), which is 25% higher vs. what we would consider normalized profitability.

As we explain below, we see signs of a moderation on earnings revisions as US earnings seem close to a peak (e.g., above normal profitability incentivizing higher imports and suggesting a pricing cap on the company’s key products commercialized in the US) and Brazil momentum has been deteriorating (e.g., demand, competition on long steel).

Exhibit 2: Gerdau’s EBITDA consensus estimates for Exhibit 3: Gerdau’s North…