Moody’s upgrades Elanco to Ba2 with stable outlook

Investing.com -- Moody’s Ratings has upgraded Elanco Animal Health Incorporated’s ratings, citing improved product uptake and ongoing debt reduction.

The credit rating agency raised Elanco’s corporate family rating to Ba2 from Ba3, while also upgrading its probability of default rating to Ba2-PD from Ba3-PD. Additionally, Moody’s upgraded the company’s senior secured bank credit facility ratings to Ba1 from Ba2 and senior unsecured notes rating to B1 from B2.

Moody’s revised Elanco’s outlook to stable from positive, while maintaining its speculative grade liquidity rating at SGL-1.

"The ratings upgrade reflects prospects for continued uptake in Elanco’s newer products, which combined with ongoing debt reduction will lead to steadily improving credit metric," said Michael Levesque, Moody’s Ratings Senior Vice President.

Recent product approvals contributing to the upgrade include Zenrelia for allergic itch and inflammation, and Credelio Quattro, an antiparasitic treatment.

Moody’s noted that governance considerations drove the rating action, reflecting reduced exposure to negative management credibility and track record factors. The company has delivered several quarters of solid results including improved top-line growth, despite previous challenges with disappointing earnings and integration issues.

Elanco’s Ba2 rating reflects its strong position in the global animal health industry, with annual revenue exceeding $4 billion and diverse product offerings across species and geographies.

As of June 30, 2025, Elanco’s gross debt/EBITDA stood at 5.1x, but Moody’s anticipates steady reduction in line with management’s longer-term target of 3.0x net leverage.

The stable outlook includes Moody’s expectations for continuing debt reduction and declining financial leverage over the next 12 to 18 months.

Factors that could lead to a future upgrade include good uptake of new products, solid top-line growth, margin expansion, and continued focus on debt reduction, with debt/EBITDA sustained below 4.25x potentially triggering an upgrade.

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