Usiminas Gains as JPMorgan Raises on Valuation, Profit Outlook

Usinas Siderurgicas de Minas Gerais SA, Brazil’s second-biggest steelmaker by output, rose the most in a week as JPMorgan Chase & Co. (JPM) removed a sell recommendation, citing valuation and the potential for improved profits.

Usiminas, as the company is also known, gained 2.9 percent to 6.77 reais at 2:14 p.m. in Sao Paulo. The Ibovespa stock benchmark added 1.3 percent. The steelmaker’s gain pared this year’s drop to 47 percent, the second-worst performance on the MSCI Brazil/Materials index, which is down 38 percent in 2013.

“We see incremental room for earnings improvement in the coming quarters as the management is focused on delivering operational improvements,” JPMorgan analysts including Rodolfo Angele wrote in a research note, in which they raised Usiminas to the equivalent of hold.

The stock’s recent drop has pushed it to a “more realistic” valuation of 6.2 times estimated earnings before interest, taxes, depreciation and amortization, compared with an industry average of 6.5 times, the analysts wrote.

Usiminas’s Ebitda rose 7 percent to 242.1 million ($106.3 million) in the three months through March from the prior quarter, according to data compiled by Bloomberg. The company is focused on “improving the operational efficiency” by cutting costs and increasing productivity, according to a statement posted on its website after first-quarter results were released.

To contact the reporter on this story: Denyse Godoy in Sao Paulo at dgodoy2@bloomberg.net

To contact the editor responsible for this story: David Papadopoulos at papadopoulos@bloomberg.net

Press spacebar to pause and continue. Press esc to stop.

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.