Fitch Ratings revised the outlook on Masco Corp.'s BBB- long-term issuer default rating to positive from stable, citing the building product manufacturer's efforts to modify its portfolio toward its higher-margin business and remodel its end-market exposure.
The planned divestiture of the company's cabinet and windows business, combined with the spin-off of its installation business in 2015, will stabilize its profitability and credit metrics better, leaving it in a better position to weather the next housing downturn compared to the last one, the rating agency said.
The outlook revision also reflects Masco's low total debt to operating EBITDA ratio remaining in the low 2x since the end of 2017. The rating agency expects the ratio to stay at or under 2.5x after the company's planned divestitures.
Fitch affirmed the company's long-term rating at BBB-, citing its robust market position, diverse product offerings, relatively stable credit metrics and free cash flow generation, offset by the lack of end-market diversification, the cyclicality of the residential housing market and high customer concentration to home center retailers.