Morgan Stanley bullish on Repsol, UBS cautious

Investing.com -- Fitch Ratings has revised the Rating Outlook for Intel Corporation (NASDAQ:INTC) from Stable to Negative, while affirming the Long-Term Issuer Default (IDR) and Senior Unsecured Ratings at 'BBB+' and Short-Term IDR and commercial paper (CP) rating at 'F2'. The revision reflects worries about Intel's de-leveraging pace in the face of a more competitive landscape that may impact its near-term operating performance.

The ratings agency has expressed concerns that weaker-than-expected operating performance might delay Intel's return of EBITDA leverage below Fitch's 2.5x negative rating sensitivity beyond 2026. This is despite the company's current efforts to de-leverage. Over the next one to two years, contributions from minority partners, attributed to Intel's debt quantum, could offset these de-leveraging efforts.

Intel's weaker-than-expected performance is partly due to less benefit from the PC refresh cycle and AI PC demand compared to its peers. This has led Fitch to moderate its revenue and profitability growth forecasts through 2026. In 2024, Fitch-estimated EBITDA leverage was 5.0x (3.3x on a net debt basis), well above the prior forecast, and is expected to exit 2026 near 3.0x (1.5x on net debt).

Fitch predicts mid-single digit positive revenue growth for Intel in 2025 due to share losses and end-stage inventory digestion. The company's restructuring aims to save $10 billion in annual costs, some of which will drive sequential profit margin expansion. However, this expansion starts from historically low levels and is constrained by outsourcing to foundry Taiwan Semiconductor Manufacturing Co. Ltd. (TSMC).

Intel's investment intensity is expected to remain high through the forecast period, with gross capital expenditure roughly 30% of revenue. This is due to the company's commitment to regaining process technology leadership and expanding the foundry business. Despite this, Intel's credit profile benefits from the company's strong market positions in PCs and data centers (DCs), even with ongoing share erosion to its traditional competitor, Advanced Micro Devices Inc. (NASDAQ:AMD), and ARM-based custom servers.

Intel faces intensified competition from AMD in both PCs and servers for DCs, as well as increasing utilization of custom ARM-based servers by cloud service provider customers. However, Intel's market share remains strong despite these challenges. Furthermore, the company's 18A products set the stage to stabilize share.

Fitch could stabilize the ratings at 'BBB+'/'F2' if EBITDA leverage falls below 2.5x over the near-term. Conversely, sustained negative organic revenue growth, expectations that Intel will not be able to expand gross profit margins due to technology challenges, expectations for EBITDA leverage sustained above 2.5x beyond the intermediate term, or FCF margins sustained in the low-single digits could lead to a negative rating action or downgrade.

As of Dec. 28, 2024, Intel's liquidity was supported by $8.2 billion of cash and cash equivalents, $13.8 billion of short-term investments and a $7.0 billion revolving credit facility due February 2029 and a $5.0 billion 365-day revolving credit facility due January 2026.

Intel Corp . is a leading designer and through its foundry services business, manufacturer of integrated circuits and related products for computing edge and datacenter (DC) markets.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

Investing.com -- S&P Global Ratings has revised its outlook on Marubeni Corp. to positive from stable, and affirmed the 'BBB+' long-term issuer credit rating and 'A-2' short-term issuer credit rating for the company on February 19, 2025. The rating agency also confirmed the 'BBB+' issue credit rating on Marubeni's senior unsecured debt.

The improved outlook is based on the potential for Marubeni to generate a stable net profit of about ¥500 billion per year, including fiscal 2024 (ending March 31, 2025), and beyond, by strengthening its nonresource business portfolio. The company's financial health is expected to improve faster due to conservative financial management and a steady accumulation of profits.

Marubeni's net profit is likely to remain around its current high level, thanks to effective measures to boost profits in nonresource businesses such as agriculture, food, and wholesale and retail power trading. These sectors are expected to generate more than ¥300 billion in annual profit on a stable basis.

The company is also expected to record a net profit of about ¥500 billion annually on a company-wide basis for one to two years from fiscal 2024 due to the aggressive replacement of unprofitable assets. Nearly 30% of Marubeni's profits are generated by its operations in North and Central America, making it less likely to be adversely affected by U.S. tariffs.

Marubeni has strengthened its risk management system following significant losses in the operations of its U.S. grain merchandiser and feed producer Gavilon and its resource business in fiscal 2019. The company has reduced new investment in risky resources and commodities, focusing instead on additional investment and capital expenditures in existing businesses. This approach limits the possibility of a significant impairment loss in the next one to two years.

Marubeni's capital adequacy is expected to improve faster than previously assumed. The company is likely to maintain a surplus of free cash flow (FCF) after shareholder returns by carefully selecting investments and aggressively selling assets under its new medium-term management strategy from fiscal 2025.

Marubeni's adjusted capital is likely to remain above the level of risk assets required under the 'A' stress scenario over the next one to two years. The company's capital adequacy ratio was around 100%-110% in fiscal 2023, slightly low among Japanese general trading and investment companies.

The positive outlook reflects the expectation that Marubeni's adjusted capital will remain above the level of risk-based capital required under the 'A' stress scenario. This is based on the assumption that the company's net profit will remain strong at around ¥500 billion, and it will maintain a conservative financial policy in the coming one to two years.

S&P Global Ratings may consider an upgrade if the company controls growth in risk assets while maintaining positive FCF after shareholder returns under continued conservative financial discipline, and if the company's return on risk-weighted assets becomes more likely to stay above 20%.

Conversely, the agency may consider revising down the outlook to stable if the company's return on risk-weighted assets approaches 15% due to a decrease in net profit to below ¥400 billion, or if the company's capital adequacy ratio falls below 100% under the 'A' stress scenario due to a worsened balance between adjusted capital and risk-based capital.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

Investing.com -- Shares of Knorr-Bremse AG (ETR:KBX) rose by 5% following the company's announcement of its 2025 guidance, which was largely in line with consensus expectations and showed a stronger than anticipated free cash flow (FCF) projection.

The German manufacturer of braking systems for rail and commercial vehicles introduced its 2025 targets with expected revenues of €8.1-8.4 billion, closely matching the consensus estimate of €8.305 billion. The forecasted operating EBIT margin of 12.5-13.5% is also in line with the consensus of 12.9%, while the projected FCF of €700-800 million is 7% ahead at the midpoint compared to the consensus of €700 million.

The company's management highlighted a solid increase in revenues and margins in its Rail Vehicle Systems (RVS) division and anticipates stable revenues with slight to solid margin growth in the Commercial Vehicle Systems (CVS) division, despite recent disposals. Additionally, management mentioned the potential for restructuring costs up to €50 million to adjust its footprint, which will likely depend on the truck cycle's trajectory and the market's recovery.

In the fourth quarter, Knorr-Bremse reported orders that were 2% ahead of consensus, with RVS orders surpassing expectations by 5%, while CVS orders fell short by 1%. The order book saw an 8% organic increase in RVS and a 6% decrease in CVS. Revenue for the quarter was slightly below consensus, 1% less than expected, with RVS performing as anticipated and CVS falling 3% short, mainly due to a weaker truck market across all regions.

Operating EBIT for Q4 was reported at €242 million, in line with the consensus of €243 million, resulting in a group operating EBIT margin of 12.2%, slightly ahead of the expected 12.0%. The RVS operating EBIT margin was marginally below expectations, while CVS's operating EBIT margin was slightly above the consensus.

The company's FCF for the fourth quarter was stable year-on-year at €482 million, ending the year at €730 million, a 32% increase YoY and significantly higher than the consensus estimate of €602 million. This performance implies a cash conversion rate of 113%. Net debt increased by 45% YoY to €912 million, with leverage at 0.7x, influenced by the acquisition of Alstom (EPA:ALSO) US Signalling.

Jefferies commented on the outlook, stating, "We see a solid guidance for 2025 showing organic growth & margin increase in both divisions despite the weak Truck trends, and strong FCF. Mgmt is also proactive in announcing potential footprint adjustment likely in Trucks, depending on the market recovery."

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

Investing.com -- Shares of Verallia (EPA:VRLA) dropped 3% following the company's release of its financial results and guidance that indicated a cautious outlook for FY25.

The glass packaging manufacturer reported that its FY24 sales and adjusted EBITDA were broadly in line with Bloomberg consensus, with sales slightly missing by approximately 1% and adjusted EBITDA matching expectations.

However, the initial FY25 guidance provided by the company fell short of consensus estimates.

In the fourth quarter of FY24, Verallia saw its sales and adjusted EBITDA come in around 3% below and 2% above expectations, respectively. Looking ahead, the company has painted a picture of an "uncertain environment" for FY25, citing subdued European consumption and rising geopolitical and trade tensions as potential risks.

Despite these challenges, Verallia expects demand in Europe to increase marginally and to remain robust in Latin America.

For FY25, Verallia is aiming for an adjusted EBITDA close to the levels of FY24, with cost control measures and a performance program anticipated to counterbalance the adverse effects of the carryover from 2024 price reductions.

Additionally, the company projects to more than double its free cash flow (FCF) generation to around €200 million. The company's perspective on volume growth aligns with that of its close peer O-I Glass (NYSE:OI), which forecasts stable volumes throughout FY25.

However, the initial FY25 guidance for adjusted EBITDA provided by Verallia is below the Bloomberg consensus of €884 million by a mid-single-digit percentage, signaling potential adjustments in consensus EBITDA growth expectations for FY25.

Bernstein analysts commented on the situation, stating, "Based on current consensus and company guidance, we would not rule out consensus adjusted EBITDA growth adjusting downwards to the mid-single-digit percentages in FY25."

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.