Uber Technologies upgraded to ’BBB’ at S&P on credit and cash flow improvements

Investing.com -- Uber Technologies Inc . (NYSE:UBER), the U.S.-based mobility, delivery, and freight technology platform, has seen an upgrade in its credit rating to ’BBB’ from ’BBB-’ by S&P Global Ratings. This upgrade reflects Uber’s continued improvements in credit metrics and free operating cash flow (FOCF).

In 2024, Uber showed healthy gross bookings and earnings growth, progressing towards its three-year financial model targets. The company’s focus on profitable growth and prudent business investment strategies are expected to support solid EBITDA and FOCF growth over the next one to two years. S&P Global Ratings expects Uber’s adjusted FOCF to exceed $5.5 billion and debt to EBITDA to decline below 1x in 2025, in line with previous expectations for rating upside.

Uber’s credit rating was raised due to its solid business execution and balanced business investments, which are expected to support earnings growth and improve credit metrics in 2025 and 2026. This stable outlook gives Uber the flexibility to pursue its newer business strategies and capital allocation goals without pressuring the rating.

In 2024, Uber’s gross bookings increased by 21% to approximately $163 billion, and EBITDA reached $6.5 billion, a 60% increase year over year. Uber expects gross bookings and EBITDA growth of 17%-21% and 30%-37%, respectively, for the first quarter of 2025.

Uber’s strengthening credit profile and a well-defined financial policy framework provide good operational flexibility to pursue its capital allocation goals. Uber’s gross leverage target of 2x, roughly equivalent to 1.5x S&P Global Ratings-adjusted leverage, is a strong commitment to financial discipline and moderate leverage levels. This allows Uber to deploy capital in a disciplined fashion for potential mergers and acquisitions and shareholder returns.

Uber is expected to target strategic investments in its core rideshare and delivery businesses to drive healthy gross bookings and earnings growth over the next one to two years. The company’s earnings growth will also come from leveraging economies of scale in its core Mobility service while expanding new Delivery categories like grocery and retail merchants.

Uber maintains significant liquidity sources, including $5.9 billion of unrestricted cash and $1.1 billion of unrestricted short-term investments as of Dec. 31, 2024. The company’s undrawn $5 billion unsecured revolver provides additional flexibility. Uber is expected to use growing excess cash flow to repurchase stock over the next 12 to 24 months.

While Uber’s core rideshare business faces meaningful technology risks and regulatory complexities, these risks may not prevent further rating upside as Uber’s earnings and cash flow continue to expand over the next one to two years. Uber exited its own autonomous vehicle (AV) business, but it has actively partnered with technology companies to position its platform to participate in the evolution of robotaxi services.

The stable outlook reflects expectations that Uber will maintain its market positions in Mobility and Delivery and profits despite the highly competitive environment and evolving technology risks. However, the rating could be lowered if Uber shifts to an aggressive financial policy or faces greater competitive threats that pressure profits. The rating could be raised if Uber experiences meaningful EBITDA and free cash flow expansion comparable with higher-rated companies while navigating competitive, complex regulatory and technology risks.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.