Morgan Stanley upgraded Ternium to overweight from equal weight and raised its price target to $65 from $55, citing progress in U.S.-Mexico tariff talks. Analyst Carlos De Alba said lower U.S. tariffs on Mexican steel would push up domestic steel prices in Mexico and lift Ternium's profitability. Shares have already risen 42% year to date.
Morgan Stanley sees tariff talks lifting Ternium
Morgan Stanley upgraded Ternium to overweight from equal weight. The bank also raised its price target on the stock to $65 from $55, implying roughly 20% upside from Thursday's close.
According to Morgan Stanley, analyst Carlos De Alba said the bank sees "a high probability that the US will reduce import tariffs on Mexican steel" as tariff negotiations progress among United States-Mexico-Canada Agreement members, which would drive price hikes in Mexico's domestic steel market and benefit Ternium's profitability.
De Alba added that the signs of a tariff reduction follow the recent completion of Ternium's investment cycle, which also stands to drive value to the company's shares.
Mexico could raise its own tariffs to 50%
The expected U.S. trade tax change is also likely to encourage Mexico to increase its own steel import tariffs to 50%, up from a range of 25% to 35%. That would tighten Mexico's steel market and push local prices closer to those in the U.S., leading to materially higher profitability for Ternium, De Alba wrote.
Morgan Stanley's call matches Wall Street consensus
Morgan Stanley's call falls in line with consensus on Wall Street. Of the 16 analysts covering Ternium, seven have a buy or strong buy rating on the stock, while six have a hold rating, according to LSEG data.
Ternium shares have risen 42% year to date. The stock ticked higher by more than 1% following the upgrade.
Source: US Top News and Analysis
Trading involves risk.
Risk Disclaimer
