Fitch revises HP view downward

Fitch Ratings said it affirmed HP Inc.’s long-term issuer default rating at BBB+ and revised the outlook to negative from stable.

The change in outlook comes after the company’s CFO said HP will continue to evaluate ways to create added shareholder value. Fitch said this could mean added mergers and acquisitions or added returns of capital to shareholders, which could signal a shift in financial policy. “Fitch believes an apparent willingness to loosen financial policy materially warrants an outlook revision at this juncture,” the agency said in a press release.

The affirmation reflects that despite recent operational challenges as reflected by unexpected mid-single-digit declines in HP’s print business, the company’s credit protection metrics are very well positioned for its BBB+ rating, due to its fairly conservative capital structure. Fitch sees the risk of erosion in these metrics with continued declines in the print segment and a reduced tailwind from Win10 PC refresh cycle. However, in the base case, key credit protection metrics still provide ample headroom (0.7x-0.8x to the 2x gross leverage negative sensitivity) to handle potential operational challenges.

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