Research Update: California-Based PC And Print Technology Company HP Affirmed At 'BBB/A-2'; Outlook Stable

HP Inc. intends to execute a cumulative $16 billion shareholder return plan, including dividends, over the next three years using expected free cash flow of $10.7 billion-$11.7 billion, excess balance sheet cash, and proceeds from debt issuance. While these transactions will reduce HP's flexibility to invest and respond to business challenges, its credit metrics will remain commensurate with the rating, with adjusted leverage rising to the mid- to high-1x area in fiscal years 2020-2021 (ending Oct. 31) from below 1x currently. We are affirming our 'BBB/A-2' ratings on HP and our 'BBB' ratings on the company's senior unsecured notes. The stable outlook reflects our expectation of flattish revenue and modest improvement in EBITDA margins as the company executes its capital

...- HP Inc. intends to execute a cumulative $16 billion shareholder return plan, including dividends, over the next three years using expected free cash flow of $10.7 billion-$11.7 billion, excess balance sheet cash, and proceeds from debt issuance. - While these transactions will reduce HP's flexibility to invest and respond to business challenges, its credit metrics will remain commensurate with the rating, with adjusted leverage rising to the mid- to high-1x area in fiscal years 2020-2021 (ending Oct. 31) from below 1x currently. - We are affirming our '###/A-2' ratings on HP and our '###' ratings on the company's senior unsecured notes. - The stable outlook reflects our expectation of flattish revenue and modest improvement in EBITDA margins as the company executes its capital return plan. We do not view the proposed plan as a material deviation from HP's current financial policies since S&P Global Ratings-adjusted leverage below 2x and free cash flow to debt above 30% support the current...

Research Update