Will Lower Shipments Weigh On Ternium's (TX) Q4 Earnings?

Ternium S.A. (NYSE:TX) is set to release fourth-quarter 2019 results on Feb 18, after the closing bell.

This Latin America's leading flat steel producer has topped the Zacks Consensus Estimate for earnings in three of the trailing-four quarters. The company has trailing four-quarter positive earnings surprise of 11.2%, on average. The company’s fourth-quarter performance is likely to get impacted by reduced shipments and lower steel prices.

The stock has lost 31.4% in the past year compared with the industry’s 19.1% decline.

Let’s see how things are shaping up for the upcoming announcement.

What to Expect

The Zacks Consensus Estimate for Ternium's fourth-quarter consolidated sales is currently pegged at $2,258 million, which suggests a 14.3% decline year over year.

In October 2019, Ternium stated that it expects to witness a decline in fourth-quarter EBITDA compared to third quarter levels. Lower shipments and reduced steel margin are expected to have hurt the company’s fourth-quarter results.

Steel pricing in the United States and Mexico are witnessing a declining trend, with prices sliding to new lows in October last year. The company noted that although steel prices appears to have bottomed out, it has likely witnessed lower realized prices in Mexico in the fourth quarter due to the lag related to contract price resets.

Factors Likely to Influence Q4 Results

The company’s fourth-quarter shipments in Mexico are anticipated to be lower compared with third-quarter levels due to normal seasonality. Moreover, the domestic construction sector is still soft while the level of industrial customer orders remains relatively flat. Also, shipments in Argentina are expected to have remained low in the fourth quarter due to persistent volatility in steel market demand.

Additionally, a challenging steel pricing environment is likely to have affected fourth-quarter margins. Shipments in the Southern (NYSE:SO) region were relatively stable in the third quarter, per the company. Shipments are expected to have been at low levels as volatility in the Argentina market persists.

What the Zacks Model Says

Our proven model doesn’t conclusively predict an earnings beat for Ternium this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. But that’s not the case here.

Earnings ESP: Earnings ESP for Ternium is 0.00%. The Zacks Consensus Estimate is currently pegged at 32 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Ternium currently carries a Zacks Rank #3.

Stocks Likely to Beat Estimates

Here are some companies in the basic materials space you may want to consider as our model shows that they have the right combination of elements to post an earnings beat this quarter:

Valmont Industries, Inc. (NYSE:VMI) , scheduled to release fourth-quarter 2019 earnings on Feb 19, has an Earnings ESP of +2.93% and carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Westlake Chemical Corporation (NYSE:WLK) , slated to release fourth-quarter 2019 earnings on Feb 18, has an Earnings ESP of +4.08% and carries a Zacks Rank #3.

Pan American Silver Corp. (NASDAQ:PAAS) , scheduled to release fourth-quarter 2019 earnings on Feb 19, has an Earnings ESP of +5.61% and carries a Zacks Rank #3.

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