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Investing.com -- S&P Global Ratings has downgraded ManpowerGroup Inc. to ’BBB-’ from a higher rating, citing a challenging macroeconomic environment that continues to pressure the staffing company’s performance. The outlook is stable.
The rating agency expects ManpowerGroup’s adjusted leverage to reach 2.8x by the end of 2025, reflecting weak but stabilizing operating performance and a significant free cash flow deficit due to negative working capital.
The staffing company’s services are highly vulnerable to economic downturns because of its exposure to manufacturing and commercial temporary staffing. Following a post-pandemic hiring surge, demand has fallen over the past three years across multiple industries and regions. This extended downturn is unusual for the staffing industry, which typically recovers within 24 months.
ManpowerGroup has implemented cost-cutting measures, restructuring, and reduced dividends and share repurchases to preserve margins and cash flows. Despite these efforts, S&P expects lower operating cash flows and negative working capital to result in a free operating cash flow deficit of $150 million-$200 million in 2025.
The rating agency forecasts ManpowerGroup’s adjusted leverage will increase to 2.8x at year-end 2025 from 1.8x at year-end 2024, with gradual improvement expected over the next couple of years to reach 2.5x-3x.
S&P noted that demand appears to have stabilized, as revenue declines have stopped in the past two quarters with growth momentum building in some areas. The agency projects modest revenue growth of 2%-3% in 2026 and 2027, with stable adjusted EBITDA margins of 2.5%-3%.
The stable outlook reflects S&P’s expectation of modest organic growth across business segments over the next 12-24 months.
S&P could lower its rating if debt to EBITDA remains above 3x on a sustained basis, which might occur due to prolonged economic downturn, inability to improve margins, or more aggressive shareholder-friendly policies.
Conversely, the rating could be raised if ManpowerGroup’s operating performance improves such that adjusted debt to EBITDA recovers to less than 2.0x on a sustained basis.
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