Moody's lifts Avnet view to positive

Moody's Investors Service said it affirmed the Ba1 corporate family and long-term debt ratings of Avnet, Inc. and revised the outlook to positive from stable.

The positive outlook reflects the agency's expectation that Avnet's operating performance will continue to benefit from the secular outsourcing trend underway in the semiconductor space, improved product mix, an expanded line card from recent acquisitions and increasing geographic diversity that collectively support operating margins at or above the 4% level.

The positive outlook also considers the solid execution and realized operating efficiency improvements that have exceeded expectations resulting in operating margin expansion, improved credit protection measures, higher gross cash flow levels and an enhanced business model that has the propensity to deliver consistent levels of positive free cash flow especially during periods of industry weakness, Moody's said.

Finally, the outlook revision also recognizes the company's enhanced market position as the leading distributor for Sun Microsystems' full line of computing solutions following the $412.5 million acquisition of Access Distribution, which was funded through a combination of debt and cash on hand. The agency said that although debt has increased, the purchase is not expected to materially weaken credit protection measures and internal liquidity given Avnet's higher operating cash flow levels plus the additive cash flow generated by Access.

The pro forma debt-to-EBITDA ratio is expected to improve modestly to 2.5x on from 2.2x at Dec. 30.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.