Moodys Ups Procter & Gamble Outlook to Positive
Moodys Ratings has affirmed Procter & Gamble's Aa3 senior unsecured ratings, Aa3 long-term issuer rating, and Prime-1 commercial paper program ratings. The firm also confirmed the Aa3 senior unsecured ratings on guaranteed debt issued by The Gillette Company and industrial revenue bonds backed by Procter & Gamble.
Moodys has changed the rating outlooks for P&G and Gillette to positive from stable, reflecting the company's ability to generate significant positive free cash flow and earnings growth through pricing, innovation, and cost savings programs. Procter & Gamble has reshaped its portfolio to focus on more stable and attractive globally-scalable products that have generated stable earnings and modest growth even in periods of geopolitical volatility and consumer weakness.
Credit metrics are consistently strong for the rating category with retained cash flow to net debt well above 25% and debt to EBITDA leverage below 2x. The recently announced acquisition of supplements maker Thorne for $3.8 billion demonstrates that Procter & Gamble can increase its presence in high-growth markets while maintaining low leverage and strong cash flow metrics through tuck-ins.
Moodys expects leverage pro forma for the Thorne acquisition to rise to just above 1.6x in the fiscal year ending June 2027, returning below 1.6x through innovation and cost optimization as well as the scaling and integration of the Thorne brand into Procter & Gamble's supplements business.