Arrow Electronics Inc.

The stable outlook on electronic component distributor and service provider Arrow Electronics Inc. reflects our expectation that the company will maintain its market position and supplier relationships, and generate positive FOCF over the next 12-24 months as working capital investment moderates. The outlook also reflects our expectation that leverage will be sustained below 3x even when accounting for shareholder returns and strategic acquisitions. We could lower the rating if the company adopts a more aggressive financial policy or pursue debt-financed acquisitions that keep leverage above 3x. A downgrade could occur because of prolonged end-market weakness or increased competitive pressures that result in leverage above the same level. We believe an upgrade is unlikely over the next two years because of

...The counter-cyclical nature of Arrow's cash flow is a key credit strengthArrow's cash flow generation is counter-cyclical as it must invest in inventories to fund growth, whereas in periods of declining demand, reducing inventory typically translates to significantly higher cash flows. We believe this offers Arrow the ability to repay enough debt to keep its S&P Global Ratings-adjusted leverage under 3x through an industry downturn....

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