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AUTOMOTIVE: Stellantis (STLA Baa1/BBB+/BBB+[P]): Ratings Impact

AUTOMOTIVE
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Agencies may give benefit of the doubt to the one-off nature of inventory reductions. Recent ratings momentum has been positive, but we wouldn’t rule out outlook changes.

  • Following heavy revisions this morning, Fitch’s positive outlook looks out of place now.
  • Moody’s upgraded only this February. 12% adj. EBITA margin, 1.3x leverage and 8.8bn in adj. FCF for 2023 were cited. Stable outlook was supported by margins above 8% and leverage below 2x. Leverage could tick just above that level now.
  • Their adjusted margin was 0.8% below reported adjusted EBIT and looks like more of an issue. Applying the same differential sees Moody’s margin hitting 5.5% at the midpoint of guidance. Negative FCF, which is the new guidance, is also another downgrade trigger risk factor.
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Agencies may give benefit of the doubt to the one-off nature of inventory reductions. Recent ratings momentum has been positive, but we wouldn’t rule out outlook changes.

  • Following heavy revisions this morning, Fitch’s positive outlook looks out of place now.
  • Moody’s upgraded only this February. 12% adj. EBITA margin, 1.3x leverage and 8.8bn in adj. FCF for 2023 were cited. Stable outlook was supported by margins above 8% and leverage below 2x. Leverage could tick just above that level now.
  • Their adjusted margin was 0.8% below reported adjusted EBIT and looks like more of an issue. Applying the same differential sees Moody’s margin hitting 5.5% at the midpoint of guidance. Negative FCF, which is the new guidance, is also another downgrade trigger risk factor.