EnPro Industries Inc.

S&P Global Ratings' stable outlook on EnPro Industries Inc. reflects our expectation that the company will maintain adjusted leverage of less than 4x throughout the economic cycle, including acquisition activity and shareholder rewards. We could lower our rating on EnPro if debt-funded acquisitions and share repurchases or operational underperformance cause the company's adjusted debt to EBITDA to approach 4x. Although less likely given EnPro's relatively high exposure to cyclical end markets, we could raise our rating on the company if it continued to expand into less-cyclical businesses, lowering the risk of a potential deterioration in its cash flow and leverage during recessionary periods. In addition, we would expect the company to maintain leverage of less than 3x throughout the business

...Cyclical, short-cycle end markets will likely remain weak for the remainder of 2020, but we expect demand to improve in 2021. As North American and European economies reopen, the outlook for heavy-duty (HD) truck, automotive, and general industrial end markets is gradually improving. However, the third quarter of 2020 will likely exhibit typical seasonal softness, with sequential growth starting in the fourth quarter. EnPro Industries Inc.'s short-cycle industrial product lines are sensitive to economic activity and should benefit from real GDP growth of 5.2% and 5.5% in the U.S. and eurozone, respectively, next year. We also expect increased oil and gas turnaround maintenance activity in 2021 but do not forecast a dramatic rebound in energy prices. Semiconductor demand should continue to be strong. EnPro's semiconductor product lines benefit from short-cycle exposure, which partially insulates the company from the industry's significant capital investment cycles. EnPro should also benefit...

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