S&P Raises ManpowerGroup (MAN) to 'BBB'; Sees Operating Performance Improving Over Intermediate Term

Standard & Poor's Ratings Services raised its corporate credit rating on Milwaukee, Wisc.-based ManpowerGroup Inc. (NYSE: MAN) to 'BBB' from 'BBB-'. The rating outlook is stable.

At the same time, we raised the issue-level rating on the company's unsecured notes to 'BBB' from 'BBB-'.

"The rating on ManpowerGroup incorporates our expectation that operating performance will continue to improve over the intermediate term based on the company's cost reductions and stabilizing economy, especially in the Eurozone," said credit analyst Andy Liu. "Standard & Poor's currently expects Eurozone GDP to increase 1% in 2014 and 1.3% in 2015. We characterize ManpowerGroup's business risk profile as "satisfactory" considering its extensive office network, global scale, and geographic diversity. We view the company's financial risk profile as "modest" based on its low debt leverage, strong liquidity, and somewhat countercyclical working capital dynamic (especially during the initial stage of an economic downturn) but also its tendency to increase leverage during periods of economic stress. We assess ManpowerGroup's management and governance as "satisfactory"."

Our rating outlook on ManpowerGroup is stable, reflecting our expectation for modest revenue growth and stable debt leverage over the intermediate term. We currently associate a stable outlook with an EBITDA margin greater than 3.5% and leverage less than 1.2x.

Downside scenario

We could lower our rating if the global economy stumbles (especially if the European economies experience a precipitous decline) causing meaningful (greater than 4%) revenue decline and if the company is unable to quickly adjust its cost structure, leading debt leverage to exceed 1.5x on a prolonged basis.

Upside scenario

An upgrade would require sustained intermediate term revenue growth and meaningful EBITDA margin expansion to near 6%. Based on competitive pricing conditions in the industry, we regard an upgrade as unlikely over the intermediate term.

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