SiteOne Landscape Supply Inc.

The stable outlook on SiteOne reflects our belief that the company will maintain debt to EBITDA in the 3x-4x range and adjusted funds from operations (FFO) to debt of about 20%-25%. We expect these metrics to be maintained despite the recessionary macroeconomic conditions, slowed new construction activity, and reduced consumer spending levels. We could lower our rating on SiteOne over the next 12-24 months if debt to EBITDA rises to above 4x or FFO to debt approaches 12% with little expectation of speedy recovery. This could happen if demand and earnings weaken due to less landscaping activity, possibly due to extended recessionary pressures. Though unlikely in the next 24 months, we could raise our rating on SiteOne by one notch

...Niche focus on landscape supplies makes business prospects highly dependent on favorable weather conditions and seasonal construction activity. SiteOne Landscapes Supply Inc. products are focused exclusively on landscape supplies. Given these products are installed outdoors, adverse weather reduces sales. Sales are also typically more heavily weighted to the spring and summer seasons. With the COVID-19 outbreak, 2020 spring sales are likely to be down, though possibly not to the extent of other building materials companies. We expect SiteOne's revenues and earnings to be more resilient to slowed economic activity compared to some other discretionary building material producers. SiteOne posted sales of nearly $2.4 billion in 2019. About two-thirds of its revenues are driven by maintenance and repair activities. Given the small-ticket nature of many of SiteOne's products, some maintenance and repair activity may not be postponed by the end consumer, even in a recessionary environment. Further,...

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