Investing.com -- S&P Global Ratings has upgraded the long-term issuer credit rating and the ratings on the senior unsecured notes of Amphenol Corp (NYSE:APH). to ’A-’ from ’BBB+’. The short-term issuer and commercial paper ratings have been affirmed at ’A-2’. The upgrade is a reflection of the company’s successful execution of its growth and business strategies, which has led to a tripling of its revenues and free operating cash flows (FOCF) over the past decade.
Amphenol Corp., a U.S.-based manufacturer of interconnect, antenna, and sensor products, has maintained strong business diversification and S&P Global Ratings-adjusted EBITDA margins in the mid-20% area. It has also managed to keep its leverage below 1.5x during most of this period. These achievements have been made despite the company’s acquisitive nature and industry and macroeconomic cyclical downturns.
S&P Global Ratings expects Amphenol’s EBITDA growth to decrease its pro forma leverage to about 1x by the end of 2025, down from a peak of about 1.4x at the close of the CommScope’s mobile networks businesses.
Amphenol’s increased scale and good business diversification have improved its business resilience while positioning it to benefit from near-term demand. With 2024 revenues of $15.2 billion and S&P Global Ratings-adjusted EBITDA of about $4 billion, the company has increased its scale to match that of its closest peer, TE Connectivity (NYSE:TEL) PLC. This growth has been driven by AI-driven demand in the IT datacom end market and an inorganic growth strategy that accelerated with the purchase of Carlisle Interconnect Technologies in May 2024 and CommScope assets on Jan. 31, 2025.
S&P Global Ratings expects Amphenol to continue generating strong FOCF, which should enable it to pursue its capital allocation and acquisition objectives while maintaining leverage well below 2x. This is despite increasing shareholder distributions and the $2.1 billion CommScope asset purchase, which was largely pre-funded by a $1.5 billion debt issuance in October 2024.
As of the end of 2024, Amphenol maintained an undrawn $3 billion revolving credit facility and about $1.2 billion of cash and short-term investments pro forma for the CommScope asset purchase. The company’s good liquidity position is supported by a sizable cash balance, undrawn facilities, and a dispersed debt maturity profile.
The stable outlook reflects S&P Global Ratings’ expectation that acquisitions and strong demand in the IT datacom, defense, and several other end markets will lead to revenue growth in at least the midteens percentage area in 2025. It is also expected that Amphenol will successfully integrate recent acquisitions and maintain EBITDA margins at least around the mid-20% area.
S&P Global Ratings could lower its rating on Amphenol if it expects its adjusted leverage will increase above 2x on a sustained basis. Conversely, the rating could be raised if the company maintains leverage of below 1x and continues to strengthen its competitive position while maintaining above-average profitability.
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