Gerdau Climbs on Earnings Outlook as U.S. GDP Tops Estimates

Gerdau SA, Latin America’s biggest steelmaker by market value, rallied on speculation second-quarter earnings were bolstered by faster-than-forecast growth in the U.S. and a weaker Brazilian currency.

The shares gained 2.9 percent to 14.59 reais at the close of trading in Sao Paulo, the biggest advance since July 11. It was the best performer on the MSCI Brazil/Materials index, which retreated 0.6 percent.

Gerdau gets about a third of sales from North America. In the U.S., gross domestic product rose 1.7 percent in the second quarter, exceeding the 1 percent median estimate of 85 analysts surveyed by Bloomberg. The GDP reading stoked optimism about Gerdau’s results before tomorrow’s earnings report, according to Victor Penna, an analyst at Banco do Brasil SA.

“The American market has a lot of weight on the performance of the steelmaker,” Penna said in a telephone interview from Sao Paulo. “Gerdau stock’s movement is always very linked to news about the U.S. economy.”

Gerdau will report second-quarter earnings before interest, taxes, depreciation and amortization fell 12 percent from a year earlier to 1.1 billion reais ($480 million), according to the average estimate of seven analysts surveyed by Bloomberg. In the first quarter, 2.93 billion reais of the 9.2 billion reais of the steelmaker’s sales came from North America.

The Brazilian real’s 11 percent plunge this year may also have helped Gerdau to improve its performance, Penna said. A weaker real increases revenue from foreign sales in local currency terms.

Gerdau has fallen 19 percent in 2013, while the materials index has slumped 34 percent.

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