Moody’s Investors Service has announced the upgrade of Molson Coors Beverage Co.’s senior unsecured rating from Baa3 to Baa2. Additionally, the outlook has been revised to positive.
Factors Supporting the Upgrade
Moody’s decision to upgrade the rating comes as a result of several key factors:
- Consistent Debt Repayment: Molson Coors Beverage Co. has demonstrated a commitment to consistent debt repayment, which has been instrumental in the rating upgrade.
- Conservative Leverage Targets: The company’s conservative leverage targets have contributed to positive growth and have led to solid debt-to-EBITDA leverage improvement.
- Revenue and EBITDA Growth: Recent good revenue and EBITDA growth have been significant drivers in the rating improvement.
- Strong Free Cash Flow: The company’s consistently strong free cash flow has further supported the upgrade decision.
Company Initiatives and Outlook
In October, the company announced a five-year $2 billion share buyback program during an investor event. Additionally, Molson Coors Beverage Co. expressed its intention to resume dividend growth after seven years of subdued activity. However, the company also committed to a slightly lower leverage target of below 2.5 times, as opposed to its previous goal of achieving 2.5 times.
While Moody’s acknowledges that the new share buyback and commitment to dividend growth may pose credit negatives, the agency remains confident that Molson Coors Beverage Co. will generate enough free cash flow to support its distribution policy and simultaneously reduce its debt.
Furthermore, if necessary, the company has a history of tempering shareholder rewards in response to operating challenges or after acquisitions.
Molson Coors Beverage Co.’s stock has shown a 16% gain year to date, outperforming the S&P 500’s 17% increase in the same period.