Gerdau S.A. (GGB)

We are keeping our Sell recommendation on Gerdau S.A. (GGB - Analyst Report) based on poor first quarter results and the worldwide crises. The company successfully renegotiated part of its debt and banks accepted to relieve some covenants.

The company's strategy to grow through acquisitions based on debt created huge leverage and financial debt is expected to increase in the short-term. The huge decline in steel prices and the international economic slowdown creates a more challenging business environment for the steel industry.

The company's strategy to grow through acquisitions based on debt is contributing to the negative news. Moreover, huge exposure to the U.S. market during a recession is a major concern.