TE Connectivity Ltd.

The negative outlook reflects our expectation for weak global growth and automotive sales, which will drive total revenue declines of 12%-15% in fiscal 2020 for TE Connectivity, leading to S&P Global Ratings-adjusted leverage rising to the low-2x area by the end of the fiscal year. Although we expect a growth recovery in 2021, the outlook also considers greater operational uncertainty over the next 12-24 months, the depth of the downturn, and the shape of a rebound as the virus' economic toll subsides. Lasting effects from the COVID-19 pandemic could lead to a mild recovery and cause adjusted leverage to remain higher than our expectations for the current rating absent a material rebound in 2021. We could revise the outlook back

...While the company will continue to benefit from industry growth drivers, weak global auto production in the near-term affects operational performance in fiscal 2020. TE Connectivity Ltd. has historically outperformed automotive end markets thanks to secular trends toward electric and engineering content in vehicles, which S&P Global Ratings expects to continue longer term. However, significant global production curtailments and a drop in unit sales due to efforts to contain the spread of COVID-19 will cause significant revenue declines and operational uncertainty in fiscal 2020. This is important because the automotive end market is a material driver of TE Connectivity's operating performance. We also expect margin pressures due to the company's concentration in this end market. Over the past few years, automotive contributed 40%-45% to revenue, including sensor products for this segment, and generated above-average profitability for the company....

Full Report