Neutral 2024 stance on US investment-grade corporates amidst yield curve normalization

January 04, 2024 (MLN): North American corporate investment-grade credit profiles will prove resilient in 2024, despite slow economic growth and uncertainty about the timing of interest rate cuts and U.S. yield curve normalization, Fitch Ratings says in a new outlook report.

Most Fitch-rated issuers will enter 2024 with leverage below our negative sensitivity, leaving room to navigate an uncertain environment, but idiosyncratic factors, financial strategy shifts, or event risk could raise downside risk for some issuers.

Fitch expects a median revenue growth of approximately 3% for our investment-grade portfolio.

Margins are expected to expand within the mid-20% range on lower inflation, even as labor costs rise for many issuers, and FCF to improve on relatively stable capex for most issuers. Median gross EBITDA leverage of 2.3x, down slightly from 2.5x in 2023, is projected.

Fitch published 27 sector outlook reports covering our North American investment-grade corporate universe.

The outlook for 74% of these sectors is neutral, 19% is deteriorating and 7% is improving.

The distribution for issuer Rating Outlooks is 82% Stable, 10% Positive, and 8% Negative, suggesting limited downside risk for most issuers in 2024.

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