NEW YORK (TheStreet) -- Shares of Gerdau (GGB) - Get Gerdau S.A. Sponsored ADR Pfd Report are gaining 2.55% to $1.61 in late-afternoon trading on Friday after agreeing to sell assets as part of a deal that BofA/Merrill Lynch said foreshadows further disposals and a quicker reduction of leverage.
The Brazilian steelmaker will sell its specialty steel operations in Spain to investment group Clerbil for 155 million euros ($174 million), according to a regulatory filing.
The deal won't significantly reduce Gerdau's $4.9 billion debt load, but demonstrates that the company remains committed to its divestment strategy, Bloomberg reports. The deal comes as steel prices rebound and Brazil moves to impeach President Dilma Rousseff and end months of political turmoil.
"The proceeds should be used to speed up the company's de-leveraging," BofA/Merrill Lynch analysts wrote in a note to clients. "We expect Gerdau to generate positive free cash flow this year."
The firm reiterated a "buy" rating on the stock.
Separately, TheStreet Ratings team rates the stock as a "sell" with a ratings score of D.
Gerdau's weaknesses include its deteriorating net income, disappointing return on equity, poor profit margins, generally disappointing historical performance in the stock itself and feeble growth in its earnings per share.
You can view the full analysis from the report here: GGB
TheStreet Ratings objectively rated this stock according to its "risk-adjusted" total return prospect over a 12-month investment horizon. Not based on the news in any given day, the rating may differ from Jim Cramer's view or that of this article's author.