Moody’s upgrades Schneider Electric to A2, outlook stable

Investing.com -- Moody’s Ratings has upgraded Schneider Electric (EPA:SCHN) SE’s long-term issuer rating to A2 from A3 and changed the outlook to stable from positive.

The rating agency announced the upgrade Friday, citing Schneider Electric’s robust organic growth, improving margins, and strong cash generation. These factors reflect the company’s strengthened business profile with reduced cyclicality in its performance.

"The upgrade to A2 recognizes robust organic growth, continuous improvements of Schneider Electric’s margins and sustained strong cash generation," said Matthias Heck, Moody’s Ratings Vice-President and Lead Analyst for Schneider Electric.

Schneider Electric has improved its operating profitability over the last five years, reaching 18.3% Moody’s adjusted EBITA margin in 2024, up from 14.7% in 2019. The company expects to further improve margins by 50 to 80 basis points organically in 2025, supported by 7% to 10% organic revenue growth.

The company demonstrated financial discipline in 2024, generating €1.7 billion in Moody’s adjusted free cash flow after dividends. It reduced its debt/EBITDA ratio to 2.2x at the end of 2024 from 2.4x at the end of 2023, bringing leverage below the 10-year average of 2.6x.

Schneider Electric’s cash balance stood at €6.9 billion at the end of 2024, providing liquidity for short-term debt maturities. In March and April 2025, the company repaid two senior unsecured bond maturities totaling €1.5 billion.

Moody’s expects Schneider Electric’s leverage to gradually improve to below 2.0x over the next 12 to 18 months, assuming no major debt-funded acquisitions or aggressive shareholder distributions.

The A2 rating reflects Schneider Electric’s scale, leading market positions, improving business profile, consistent free cash flow generation, and commitment to maintaining a strong investment-grade rating.

Potential constraints on the rating include the company’s exposure to cyclical end markets like construction and oil and gas, its progressive dividend policy often complemented by share buybacks, and the risk of debt-funded acquisitions.

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