Gerdau (GGBR4.SA) 2Q26 Strong, 3Q26 To Be Better

Equity Research 5 August 2026 | 5:32AM BRT

Gerdau (GGBR4.SA): 2Q26 Strong, 3Q26 To Be Better

Gerdau’s 2Q26 EBITDA of R$3.4B (+34% y/y) was broadly in line with GSe (+3%), but Marcio Farid | beat Visible Alpha Consensus by 7%, mostly driven by stronger North America Goldman Sachs do Brasil CTVM S.A. results. We expect a positive market reaction. Emerson Vieira | North America operations posted a solid quarter, with EBITDA margins (26%) Goldman Sachs do Brasil CTVM S.A. expanding to the highest level of the past 12 quarters, on the back of strong volumes Henrique Marques (+5% q/q; +7% y/y) and realized prices (+3% q/q; +3% y/y), supported by the | continuation of the trade barriers in the US. Order backlog continues to increase, Goldman Sachs do Brasil CTVM S.A. reaching >100 days for the quarter (vs. ~90 days in 1Q26), and we expect the market to stay resilient while tariffs remain in place, with room for higher margins in 3Q26 (GS at 27.7%) as price hikes continued to be announced (link, link).

Brazil operations posted a sequential earnings improvement, led by higher realized prices (imports decline through the quarter) and solid cost control, but recent feedback pointed to some price accommodation for flats given excess supply chain inventories, while for longs domestic competition remained elevated and recent cost easing has lowered price support, so we don’t anticipate significant changes into year-end. Miguel Burnier project is at an advanced testing phase, with start-up expected for 3Q26, which should gradually uplift Brazil’s margins in 2027 (GS at 13% EBITDA margin).

Gerdau also announced dividends of R$451M in 1Q26 (~1% yield) and executed 31% of its buyback program (R$334M).

We maintain our Buy rating and see Gerdau trading at 9% FCFy and 4x EV/EBITDA for 2027.

n Brazil: Slightly better-than-expected EBITDA on lower SG&A. Brazil operations EBITDA of R$705M (+22% q/q; -20% y/y) was slightly above GSe (+5%), but more in line with VA Consensus (+1%). Realized prices (+4% q/q) and cost/t (+3% q/q) were strictly in line, while sales volumes were a tad below (-1% vs GSe; driven by lower-than-expected exports). While costs were impacted by higher input/logistics costs, this was partially offset by fixed cost dilution, while SG&A was also lower-than-expected, explaining most of the slight beat. Demand was moderate in the quarter (stable construction, but still-pressured industrial segment and with some signs of recovery in heavy autos from a low base, where Gerdau has exposure through special steel grades). The recently announced 30% reduction in the annual quota covers 30% of volumes sold by Gerdau in Brazil.

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Goldman Sachs Gerdau (GGBR4.SA)

n North America: Broadly in-line EBITDA; Better realized prices/volumes offset by higher costs. Gerdau’s North American division EBITDA of R$2.6B (+15% q/q; +59% y/y) was broadly in-line with GSe (+1%), but beat VA Consensus by 7%. Sales volumes (+3% vs GSe) continued running strong (+5% q/q; +7% y/y) with order backlog expanding to >100 days (vs ~90 days in 1Q26 and 70 days historically). Management also noted a gradual recovery in sales volumes for lower-margin special steel products. Realized prices (+3% q/q) were also a tad better (+2% vs GSe), likely on mix, but offset by higher-than-expected cost/t (+2% GSe). Recent news (link, link) shows Gerdau North America announced price hikes for beams/merchant bar/SBQ from $30/st to $80/st, effective from August 3 orders. We think this coupled with price carry through 2Q26 and elevated sales levels can lead to further margin expansion in 3Q26 (GS at 27.7%) as scrap prices have moved sideways since end of June.

n South…