Gerdau Q1 2026 slides: North America drives 25% EBITDA growth

Gerdau posted a strong Q1 2026 rebound, with adjusted EBITDA of R$3.0 billion, adjusted net income of R$1.0 billion, and EPS turning positive at R$0.51, while shares rose 3.89% to R$9.35. North America drove 75% of EBITDA with a 24.1% margin, offsetting weakness in Brazil where steel imports reached 27% of the domestic market. The company also returned capital via R$354 million in dividends, R$211 million in buybacks, and advanced major renewable and capacity projects, including the 452 MWp Barro Alto Solar Complex.

Analysis

The key signal is not the headline beat itself, but the widening dispersion inside the business mix: North America is now doing enough heavy lifting that Brazil can keep deteriorating without breaking consolidated earnings. That makes GGB/GOAU3 less of a pure Brazilian steel beta and more of a levered play on U.S. construction, grid, and industrial capex — which should keep the stock relatively insulated as long as U.S. backlog stays elevated and scrap/steel spreads remain favorable. The market is likely underpricing how much regional mix can offset tariff noise: when the best margin pool is in a different jurisdiction, domestic import pressure becomes more of a valuation overhang than an earnings cliff.

Second-order effects favor upstream and adjacent suppliers more than the steelmaker itself. A sustained push into renewable power self-generation and lower-carbon product lines can improve long-run competitiveness, but near term the bigger implication is cost durability: lower energy intensity and more internal generation reduce the company’s sensitivity to Brazilian power volatility and FX pass-through, which should support cash flow even if commodity spreads normalize. That said, the capex intensity is front-loaded, so free cash flow could look noisier over the next 2-3 quarters than EBITDA implies, especially if working capital expands again.

The main risk is policy reversal on the U.S. side rather than Brazil: any change to trade barriers, tariff enforcement, or a slowdown in non-residential activity would hit the highest-margin engine first and compress the whole equity story quickly. Consensus may be too anchored to the recent recovery and too slow to discount the fact that this is still an industrial cyclical with a strong earnings tailwind, not a secular compounder. If North American order visibility rolls over before the new projects contribute, the market could de-rate the stock before the Brazilian turnaround ever materializes.

Key Decisions for Investors

• Long GGB / GOAU3 on pullbacks, 1-3 month horizon: use the stock as a proxy for North American steel margin resilience, with a thesis that consolidated EBITDA stays supported even if Brazil remains weak; trim if U.S. backlog falls below the 70-day historical norm.
• Pair trade: long GGB vs short regional Brazil industrials exposed to domestic demand and imports, 2-4 months. Rationale: GGB’s geographic diversification and self-generation make its earnings more defensible than pure domestic peers if import penetration stays elevated.
• Buy downside protection on GGB if already long, 3-6 months. The cleanest left-tail risk is a sudden U.S. policy or demand shock; put spreads are preferable to outright puts because the balance sheet and buyback support limit near-term downside.
• Watch for a tactical long in suppliers tied to GGB’s capex cycle over the next 6-9 months, but only on confirmation of project execution. The better trade is to own the beneficiary of the investment phase before EBITDA from Midlothian/Miguel Burnier is fully visible.
• If U.S. steel spreads tighten or Section 232/USMCA headlines turn negative, reduce exposure quickly rather than waiting for Brazil to improve; the stock’s multiple will likely compress faster than earnings can re-rate.