Matthews International Corp.

Our stable outlook reflects our expectation that the company will continue to achieve revenue growth in the mid- to high-single-digit percent range, with EBITDA margins of 15% to 16%. We also expect the company to achieve leverage of less than 4.5x during the coming year and to maintain funds from operations (FFO) to debt at about 16% to 17%. We could lower the rating if the company's adjusted debt leverage exceeds 4.5x on a sustained basis. This could stem from a more aggressive acquisition policy, failure to realize adequate synergies, or continued headwinds across each of its segments. We estimate that a decline in EBITDA margin of roughly 200 basis points (bps) or more could result in leverage exceeding 4.5x.

...The company's business is diverse, and some segments are among the leaders in their industries.Matthews International Corp. consists of three primary business segments: the branding strategy business, which accounted for about half of 2018 revenues, designs, manufacture, and markets brand solutions; the funeral products ("memorialization") segment, which sells caskets and related products contributed about 40%; and the industrial products business contributed the remaining 10%. We believe the combination of three largely unrelated businesses provides a supportive level of diversity. The company has leading positions in the memorialization and brand-management industries. It also has a growing presence in the faster-growing, but potentially more cyclical, industrial products business. However, the company has recently seen lower revenues due to the loss of a key customer in the branding segment, customer delays in its warehouse automation business, and weakening trends as fewer U.S. funerals...

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