Moody’s downgrades Hubbell

Moody's Investors Service said it downgraded Hubbell Inc.'s senior rating to Baa1 from A3 and revised the outlook to stable from negative.

The downgrade reflects Moody's expectation that despite expected improvements in the company's end markets, the company's leverage credit metrics will remain elevated over the intermediate term. The debt to EBITDA ratio was above 2x (inclusive of Moody's standard adjustments) for the last 12 months ended June 30.

The agency said Hubbell's top line is benefiting from a recovery in its energy and industrial markets, but it added that the combination of rising raw material costs, pricing pressures and recent dilutive acquisitions has softened profit margins. Hubbell also is likely to use its free cash flow generation, in the $200 million range, to support additional bolt-on acquisitions and shareholder returns, Moody’s believes.

Hubbell's long-term rating is supported by the ability to use acquisitions to mitigate weakness in certain industrial and energy related end markets over the years, the agency said.

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