Wednesday, November 4, 2009

Another Ternium Convert

Last week Morgan Stanley got religion on Ternium, upgrading TX to "overweight" from "equal weight". Does that mean neutral?

How can you be neutral on Ternium?

Analyst Carlos De Alba finally asked himself that question.

His conclusion is most telling:
The Sidor sale will increase Ternium's cash balance to $2.8 billion by the end of 2010... Therefore, we expect Ternium to have the strongest balance sheet in our steel coverage universe."
We've been saying that for months on this lonely little blog. In fact, I'll go so far as to say that one must be ignorant of Ternium and its fundamentals to invest in any other steel company.

Morgan doesn't go that far. But they're already playing catch-up.

Morgan Stanley's old price target: $22 a share.
Morgan Stanley's new price target: $33 a share.

What a laugh. It's almost like Mr. De Alba looked at Ternium for the very first time!

Note to self: Find resume.

Disclosure: Author owns shares of Ternium


  1. What is your take on this release? Pretty strong, huh? Looks like they kitchen sinked last quarter on COGS, and now are putting up 20% EBITDA margins...

  2. $100 million in earnings and $250 million in cash flow? Yeah, I'd say that's pretty strong. The balance sheet is where the real fun is. If they can stabilize at these profitability levels (and perhaps start growing again), then the stock is still cheap.

    Stay tuned