S&P Global Ratings revised its outlook on Eaton Corp. PLC to stable from negative and affirmed the A- corporate credit rating, citing the Irish diversified electrical products company's reduced debt leverage.
The rating agency said the company's credit ratios have improved to "more comfortable levels" since it initially revised the outlook to negative in mid-2016, thanks to rebounding organic sales growth, productivity gains, margin expansion and the rising value of its pension assets.
"Eaton's funds from operations-to-debt ratio was 34% and 33% at the end of the December 2017 and March 2018 quarters, respectively," S&P Global Ratings said. "This is a favorable five percentage point improvement relative to the 28%-29% figures the company generated in 2016 and most of 2017."
Eaton's adjusted EBITDA expanded to $3.8 billion, an almost $300 million increase from two years ago, while margins expanded by 100 basis points to 18.4%, S&P added. Meanwhile, Eaton's U.S. pension assets rose by more than $600 million, reducing the company's net pension and other post-retirement liabilities.
The rating agency said solid macroeconomic and end-market conditions along with ongoing productivity gains will allow Eaton to generate credit measures that are appropriate for the ratings.
This S&P Global Market Intelligence news article may contain information about credit ratings issued by S&P Global Ratings, a separately managed division of S&P Global. Descriptions in this news article were not prepared by S&P Global Ratings. The original S&P Global Ratings document referred to in this news brief can be found here.
