Masco Corp. (MAS) Ratings Affirmed by S&P; Outlook Stable
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S&P Global Ratings said it affirmed its 'BBB' corporate credit and issue-level ratings on Masco Corp. (NYSE: MAS). The outlook is stable.
"Our 'BBB' rating and stable outlook on Masco Corp. reflect our view that residential housing starts and repair and remodeling spending will continue on a moderate path in 2017 and 2018," said S&P Global Ratings credit analyst Pablo Garces. "In combination with improvements in operating efficiencies and margin expansion, this will allow Masco to maintain leverage measures solidly in the intermediate category, with adjusted net debt-to-EBITDA leverage at or near 2x over the next 12-24 months."
Given our outlook for improving U.S. housing fundamentals and improved repair and remodeling spending, we think a downgrade would be unlikely over the next two years. However, one could occur if the expected continued improvement in housing and remodeling trends reversed significantly or if Masco's European business became subject to steep recessionary pressures there. A downgrade could also occur if Masco assumed a significantly more aggressive financial policy with regard to share repurchases, acquisitions, and/or dividends, depleting its large cash balance such that leverage approached or surpassed 3x on a sustained basis.
We view an upgrade as unlikely over the next two years unless Masco assumed a more conservative financial policy while maintaining adjusted net debt leverage of 2x or below. An upgrade would also be possible if we concluded Masco had successfully reduced future earnings volatility, resulting in a strong business risk profile while maintaining long-term debt leverage at the lower end of the intermediate range (2x-3x) even during cyclical downturn. Finally, we would also consider an upgrade if Masco undertook a substantial acquisition that added business diversity (and with less correlation to markets affecting its current businesses).
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