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Investing.com -- S&P Global Ratings has upgraded Core & Main L.P. to ’BB’ from its previous rating, citing the company’s ability to maintain low leverage despite significant acquisition spending and share repurchases.
The rating agency expects Core & Main’s debt leverage to remain between 2.5x and 3x in fiscal years 2025 and 2026, staying below 4x even during periods of acquisitions or weaker economic conditions. This projection is supported by the company’s performance in the first half of fiscal 2025, with S&P Global Ratings-adjusted debt to EBITDA of 3.1x for the trailing 12 months ended August 3, 2025.
Core & Main has demonstrated consistent leverage management, keeping debt leverage below 3.5x over the last four fiscal periods. In fiscal 2024, despite spending $740 million on acquisitions and $176 million on share repurchases, the company’s debt leverage only increased to 3.2x.
For fiscal 2025, S&P forecasts revenue growth of approximately 3%, supported by growth in municipal end markets and stable commercial end markets, which have helped offset weaker residential demand. EBITDA margins are expected to be flat to slightly down, remaining around 13.5% compared to 13.7% in fiscal 2024, due to weaker residential demand and higher SG&A expenses.
The rating agency anticipates Core & Main will generate free operating cash flows between $500 million and $550 million in fiscal 2025. S&P’s forecast includes $100 million in share repurchases, $250 million in acquisitions, and $10 million in dividends.
Core & Main’s competitive advantages include its leading market share (approximately 19%) in the fragmented water infrastructure supply market, high EBITDA margins (around 13%), and diverse customer base, with no single customer accounting for more than 1% of sales. About 50% of demand for its products comes from maintenance, repair, and replacement work, which S&P views as less volatile than new residential developments (20%) and commercial markets (38%).
The company’s expected fiscal 2025 revenue of $7.7 billion provides scale advantages over smaller competitors in both pricing and supplying larger regional or nationwide projects.
S&P’s stable outlook reflects its expectation that Core & Main’s debt leverage will remain close to 3x over the next 12 months, supported by acquisition contributions, growth in municipal end markets, and strong cash flow generation.
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