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Consumer Cyclicals Flashcards

1
Q

BORGWARNER INC (BWA)

A

Global automotive supplier headquartered in Auburn Hills, MI. Supplies engineered systems and components for powertrain applications worldwide incl. engines, transmissions, drive shafts. Specializes in propulsion systems and components. Supplies nearly every major automotive OEM in the world

2Q24 results were generally above consensus. FY24 guide was raised though revenue lowered. Completed spin of PHINIA in July 2023. Well positioned for EV evolution particularly in China. Tgt gross lev <2.0x (2Q24 1.9x).

Baa1/BBB/BBB+
Automotive - Americas
$2.05bn in index across 3 issues

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2
Q

DANA INC (DAN)

A

Designs and manufactures efficient propulsion and energy-management solutions for various mobility markets, including light vehicles, commercial vehicles, and off-highway equipment. They also focus on e-Mobility solutions, which are becoming increasingly important as the automotive industry shifts towards electric vehicles. Dana’s financial health is supported by its diversified product portfolio and global presence, which helps mitigate risks associated with market fluctuations. Their strong cash flow and consistent EBITDA margins are positive indicators for credit investors.

Has widened out modestly but relatively in line with average relationship with the index. Outyielding 7-10 year BBs at 6.3% but well inside the index. Would watch closely for better buying opportunities. Potential takeout target.

Ba3/BB-
Automotive - Americas
$1.55bn in index across 4 issues

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3
Q

FORD MOTOR COMPANY (F)

A

Strong brand and extensive product lineup, including the popular F-Series trucks and Mustang. Focus on innovation, electric vehicles, and mobility solutions. Robust market presence, strong brand loyalty, and significant investments in EV technology. Substantial pension liabilities.

2Q24 earnings were below expectations with EBIT well below (Rev and EPS beating). FY24 guidance reflects better Pro outlook offset by lower Blue guide. FY24 FCF is guided to $7.5-8.5B (raised) and EBIT $10-12B. Ford Motor Credit solid businesses to support the Auto business. Still Ba1(s) at Moody’s which is not likely to change near term. Should trade 30-35bp wide of GM (current 46bp). Would look to add if portifolio is less concerned about potential consumer headwinds.

Ba1/BBB-/BBB-
Automotive - Americas
$45.58bn in index across 36 issues

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4
Q

GENERAL MOTORS CO (GM)

A

Well positioned with a strong new product pipeline, improved pricing and volumes, and lower costs to mfg. Diverse portfolio of brands incl. Chevrolet, GMC, Cadillac, and Buick. EV innovation, autonomous driving technology focus. High capex and exposure to cyclical market fluctuations.

2Q24 earnings were better than expected with Rev, EBIT and EPS beating. FY24 guidance was raised. FY24 Auto FCF is guided to $9.5-11.5B and EBIT of $13-15B. GMF solid businesses to support the Auto business. Solid mgmt team, well positioned for auto evolution; 5s/10s at 42bp is relatively steep; should trade tighter to LEA (current +16bp) and to VW (current +19bp)

Baa2/BBB/BBB
Automotive - Americas
$49.45bn in index across 45 issues

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5
Q

GOODYEAR TIRE & RUBBER COMPANY (THE) (GT)

A

One of the world’s largest tire companies, producing tires for various applications, including consumer vehicles, commercial trucks, and industrial machinery. They also offer services such as tire retreading and fleet management solutions. Goodyear’s financial stability is bolstered by its extensive global distribution network and strong brand recognition. The company’s recent transformation plan aims to optimize its portfolio and reduce leverage, which is a positive sign for credit investors.

Widened out ~100 bps recently with auto weakness and port issues - believe aftermarket sales % and idiosyncratic potential for improvement make the firm more attractive than some names in autos. Long duration, and ability to pick up yield on rating category and index.

B2(Neg)/B+/BB-
Automotive - Americas
$4.19bn in index across 7 issues

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6
Q

LEAR CORPORATION (LEA)

A

A leading supplier of automotive seating and electrical power management systems, 25% global market share in seating, behind only Adient (low-30%)

2Q24 results mixed, 2024 guidance lowered below consensus. Leverage target 1.5x. M&A unlikely, will use FCF for shareholder returns (85% of FCF since 2011; targeting >80% payout in 2024). Trading about 5bp inside GM 32s

Baa2/BBB/BBB
Automotive - Americas
$2.60bn in index across 6 issues

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7
Q

MAGNA INTERNATIONAL INC (MGCN)

A

One of the largest automotive parts suppliers globally, most diversified supplier by products offered. Offers range of products/services incl. vehicle engineering, mfg, assembly. Significant customer concentration (six customers: 79%)

2Q24 miss; 2024 guidance slightly lowered on expectation for lower light vehicle production in Europe. Taking steps on cost/investment front to mitigate profit impact from auto industry headwinds. Reported leverage 1.9x at 1Q24 (expecting leverage to go down by YE24, on track to be within target 1.0-1.5x range by YE25).

A3/A-
Automotive - Americas
$2.60bn in index across 5 issues

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8
Q

BENTELER INTERNATIONAL AG (BENTLR)

A

Operates in the automotive, steel/tube, and mechanical engineering sectors. They provide ready-to-install modules, components, and systems for automotive bodies, chassis, and engines. Benteler’s diversified operations across multiple industries help spread risk. Their focus on innovation and sustainability, along with a strong global presence, supports their financial resilience.

Will likely face a challenging 2H24 (inline with industry peers). Weak earnings could see the name move a leg lower (results on Aug 28th) and provide a better entry point. Already overweight exposure across portfolios.

Ba3(Pos)/BB-
Automotive - Europe
$0.50bn in index across 1 issues

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9
Q

ZF NORTH AMERICA CAPITAL INC (ZFFNGR)

A

Global technology company supplying advanced mobility products and systems for passenger cars, commercial vehicles, and industrial technology. They focus on electrification, automation, and digitalization. ZF’s strong market position and diversified product portfolio contribute to its financial stability. Their commitment to sustainability and innovation enhances their long-term growth prospects, making them attractive to credit investors.

Upside risk from potential move to IG, we don’t view this as priced in and trades wide to auto supplier crossover names. Whilst we view an upgrade to IG in the near term as unlikely, this could be accelerated. ZF mgmt. is focused on deleveraging the balance sheet and achieving an IG credit rating through cost cutting and asset disposals.

Ba1*-/BB+
Automotive - Europe
$2.70bn in index across 4 issues

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10
Q

AMERICAN HONDA FINANCE CORPORATION (HNDA)

A

Headquartered in Tokyo, Japan, one of Japan’s leading global automakers (under Honda and Acura brands) and the world’s largest motorcycle producer. Competitive advantage in hybrids. Financially conservative, strong balance sheet

F1Q25 beat. Fiscal 2025 guidance for automobile unit sales in China lowered but consolidated sales and op profit guidance affirmed. Stable fundamentals overall. NDA also supported by a high margin motorcyle business Should trade inside of MGCN; tighter to CMI.

A3/A-/A
Automotive - Other Developed
$16.90bn in index across 24 issues

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11
Q

NISSAN MOTOR ACCEPTANCE COMPANY LLC (NSANY)

A

Innovation in EV (Nissan Leaf), strong presence in Asia and NA. Renault owns 43% of Nissan and Nissan owns 15% Renault as well as 34% Mitsubishi Motors. Financial instability and high debt levels

D/g to BB+ at S&P on 3/7/23; new Fitch rating 4/26/23. 1Q25 results were below expectations with Rev miss likely due to China and inventory. NSANY FY25 guidance raised Rev (Y14.0T) Op Profit lowered (Y500B) and Volumes up yoy. Trades ~40bp wide of F 30s despite similar split ratings.

Baa3/BB+/BBB-
Automotive - Other Developed
$10.25bn in index across 9 issues ($10.25bn 144a)

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12
Q

PACCAR FINANCIAL CORP (PCAR)

A

One of the largest builders of trucks and aftermarket parts under the Kenworth, Peterbilt, and DAF nameplates. Second-highest quality auto name

Stable fundamentals. 2Q24 results mixed with revenues ahead of consensus but margins and EPS lagging. 2024 retail sales guide for U.S./Canada lowered to 240-280k units (after being lowered to 250-290k from 260-300k previously). Expects retail sales growth in FY25 and FY26 ahead of FY27 emissions regulations

A1/A+/A
Automotive - Other Developed
$4.95bn in index across 12 issues

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13
Q

TOYOTA MOTOR CREDIT CORP (TOYOTA)

A

Japanese auto OEM, leading position with brand recognition. Industry leading margins, big exporter (currency exposed). Financially conservative, strong balance sheet, solid liquidity. Highest quality auto name

Significant global operation. Should trade tightest of the sector. Solid fundamental name; appropriate for more defensive portfolios. Broadly in-line F1Q25 results, fiscal 2025 guidance affirmed. Shipment and production has normalized following certification/compliance issues earlier in the year. Currently trading 30bp inside of BMW and 35bp inside of MBG which is potentially rich relative despite better fundamentals.

A1/A+/A+
Automotive - Other Developed
$32.70bn in index across 43 issues

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14
Q

ADT SECURITY CORP (ADT)

A

Provides security and automation solutions for residential and commercial customers. Their services include monitoring, installation, and equipment sales. ADT’s recurring revenue model from monitoring services and strategic acquisitions support their financial health. Their strong market presence and focus on innovation in security solutions are positive indicators for credit investors.

Underweight based on valuation limited upside. #1 provider of residential security and installer of solar panels. RMR (Recurring Monthly Revenue) of $382M (all-time high), up 4% y/y and

Ba2/BB
Consumer Cycl Srvs - Americas
$1.73bn in index across 2 issues

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15
Q

GARDA WORLD SECURITY CORP (GWCN)

A

Provides security services, including armored transportation, cash management, and protective services. The company’s diversified service offerings and strong market position support their financial stability. Their focus on expanding through acquisitions and enhancing service capabilities is attractive to credit investors.

Bonds look unattractive for rating, but possible rating upgrade candidate; possible change of PE and/or splitting of company. Provider of manned-guard services, intelligent devices, airport security, and

B2/B/BB
Consumer Cycl Srvs - Americas
$2.62bn in index across 5 issues

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16
Q

BOYD GAMING CORPORATION (BYD)

A

Operates numerous gaming properties across the U.S. and holds a strategic partnership with FanDuel for sports betting. Their business model combines traditional casino operations with online gaming, providing diversified revenue streams. Boyd Gaming’s financial stability is supported by strong cash flow from its extensive property portfolio.

Solid ballast position; has held steady while Red Rock has tightened and now see similar value in the two.

B1/BB
Gaming - Americas
$1.90bn in index across 2 issues

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17
Q

GLP CAPITAL LP (GLPI)

A

GLPI is a REIT focused on gaming properties, benefiting from stable cash flows through long-term triple net leases. Strengths include geographic diversification and stable tenant income. However, high tenant concentration and weaker tenant credit profiles pose risks.

2Q results inline. Largely regional casino exposure which makes underlying property revenues less cyclical; largest tenant is Penn National (represents ~62% of total revenue); Expect additional M&A, which could result in levering as net leverage is ~4.7x and target leverage is 5.0-5.5x - management indicated they will make use of the capacity opportunistically and do not expect to be below target forever. Should trade wide of VICI given size, scale and liquidity differences

BB+/BBB-
Gaming - Americas
$6.03bn in index across 9 issues

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18
Q

MGM RESORTS INTERNATIONAL (MGM)

A

Global hospitality and entertainment company with a significant presence in the gaming industry. Their business model includes owning and operating hotels, casinos, and entertainment venues, as well as expanding into online gaming. MGM’s financial strategy focuses on enhancing customer experiences and exploring growth opportunities in international markets.

Continue to recommend an UW position in MGM given preference for CZR bonds with similar balance sheet, deleveraging story, owned real estate and wider spread. Neutral on the recently issued ’32s.

B1/BB-/BB-
Gaming - Americas
$2.58bn in index across 4 issues

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19
Q

SCIENTIFIC GAMES HOLDINGS LP (SCGALO)

A

Rebranded as Light & Wonder, focuses on providing technology platforms and content for the gaming industry. Their business model includes offering lottery, gaming, and digital solutions. Financially, the company is working on deleveraging its balance sheet and investing in growth areas to enhance shareholder value.

Continue to prefer to MGM given better balance sheet.

B2/B+/BB
Gaming - Americas
$0.80bn in index across 1 issues

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20
Q

VICI PROPERTIES LP (VICI)

A

VICI is a REIT specializing in gaming, hospitality, and entertainment properties. It has strong cash flow stability due to long-term leases with major gaming operators. Weaknesses include high tenant concentration and exposure to the cyclical gaming industry

Net leverage at 2Q was 5.6x just above the 5.0-5.5x target as results were inline. Expect the company to continue to delever to the middle of their target range. VICI diversified its customer base (CZR ~40% of revs and MGM ~35% of revs) and has been active in bolt-on BD activity outside of gaming. Post MGM transaction the combined company has significantly improved scale and geographic diversity, and reduced tenant concentration. Expect additional M&A. Should trade 10+bps inside GLPI

BBB-/BBB-
Gaming - Americas
$11.84bn in index across 14 issues ($6.29bn 144a)

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21
Q

INTERNATIONAL GAME TECHNOLOGY PLC (IGT)

A

Multinational gambling company that designs, manufactures, and distributes gaming equipment, software, and network systems. Headquartered in London, IGT operates through segments like Global Lottery, Global Gaming, and PlayDigital. The company differentiates itself through its comprehensive gaming solutions and strong presence in both land-based and digital gaming markets. Diversified product offerings and strong market presence, but regulatory risks and market competition

Committed to $2bn debt reduction with disposal proceeds from machines and digital segments upon closing by 3Q25, PF net lev. 2.5x. Peak capex in 2025-26 with material contract renewal incl. Lotto Italia. On positive watchlist of S&P and Fitch, but Underweight on BBB-level valuation. Upgrade candidate. On Rating Watch Positive at S&P (BB+) and Fitch (BB+) for upgrade upon Gaming and Digital disposal closing by 3Q25, due to committed debt repayment with proceeds driving PF leverage -0.5x to 3x

Ba1/BB++/BB++
Gaming - Europe
$2.25bn in index across 3 issues

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22
Q

ASHTON WOODS USA LLC / ASHTON WOODS FINANCE CO (ASHWOO)

A

Homebuilder that designs, builds, and markets single-family homes. They operate as a special purpose entity to issue debt securities for refinancing and acquisitions. Financially, Ashton Woods focuses on maintaining a strong balance sheet and optimizing their capital structure to support growth.

Managed well through the cycle; orders outperforming on prior community count growth; tends to rely on acquiring finished lots; land bank skewed towards options; owned by Great Gulf Group since ‘09; sponsor has significantly accelerated non-tax related dividends; UW longer bonds as it shouldn’t trade on top of CCS

B1/BB-
Home Construction - Americas
$1.00bn in index across 3 issues

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23
Q

BEAZER HOMES USA INC (BZH)

A

Designs, constructs, and sells single-family and multi-family homes across the U.S. Their business model emphasizes energy-efficient construction and innovative home designs. Financially, Beazer Homes benefits from a strong market presence and strategic land acquisitions, which support their long-term growth and profitability.

Barbell strategy in terms of buyer mix; historically been more cautious relative to others operationally; not as aggressive with incentives which could lead to order underperformance; doesn’t want to move into outer rings; focused on maximizing profitability; strong community count growth targets; targets debt/cap in the low 30s; OW on valuation; pick up extra spread for similar fundamentals

B1/B+
Home Construction - Americas
$0.95bn in index across 3 issues

24
Q

CENTURY COMMUNITIES INC (CCS)

A

National homebuilder offering single-family homes, townhomes, and condos. They operate in 18 states and provide mortgage, title, and insurance services through their subsidiaries. Financially, Century Communities focuses on maintaining a strong balance sheet and generating consistent cash flow through strategic land acquisitions and home sales.

Tends to react quicker to conditions relative to peers; spec driven strategy leads to pricing later in the cycle; heavy use of incentives led to margins overcorrecting; land light strategy - 55% optioned; rumored as a target in the past; targets sub 40% net debt/cap; OW on valuation relative to lower quality builders

Ba2/BB
Home Construction - Americas
$1.00bn in index across 2 issues

25
Q

D R HORTON INC (DHI)

A

D.R. Horton is one of the largest homebuilders in the U.S., known for its diverse product offerings. It benefits from strong cash flow generation and low leverage, reflected in its A- rating. However, it is exposed to the cyclical nature of the housing market. Highest quality in home construction

Entry-level and first time move-up buyer focused; largest homebuilder in the U.S. by volume. Supply/demand dynamics remain favorable with low inventory in affordable space and demand still holding up. Some margin pressure possible from ongoing incentives/rate buydowns but manageable. Strong national share but see opportunistic in expanding in local markets - do not see the need for large M&A, will focus on smaller private players with local/regional focus (cash transactions). Low leverage and strong balance sheet; current consolidated debt/capital at 18.8% is below 20% target, do not want to delever further and will refinance all upcoming maturities. Ratings upside. Fundamentally solid name but remain Neutral on RV.

Baa1(Pos)/BBB+/A-
Home Construction - Americas
$1.60bn in index across 3 issues

26
Q

LENNAR CORPORATION (LEN)

A

Lennar is a leading homebuilder in the U.S., with a diverse portfolio of residential properties. Strengths include a strong market position and solid financial metrics. Weaknesses include exposure to the cyclical housing market and significant capital requirements

Largest builder with diverse footprint, skewed to entry-level; strong management team; shifted towards more conservative land light model; strong liquidity. Similar to DHI, focus is on entry-level buyers. Management constructive on current economic environment - strong employment, demand driven by strong household formation, short supply. Potential margin pressure from incentives but manageable. Continues to move to a land-light strategy. Strong balance sheet; reported debt/capital 7.6% at F3Q24. Ratings upside. Fundamentally strong name that offers some pick-up vs. higher-rated DHI.

Baa2(Pos)/BBB/BBB+
Home Construction - Americas
$1.44bn in index across 3 issues

27
Q

MERITAGE HOMES CORP (MTH)

A

Homebuilder specializing in energy-efficient homes for entry-level and first move-up buyers. They operate in multiple states and focus on sustainable building practices. Financially, Meritage Homes benefits from strong demand for their energy-efficient homes and a disciplined capital allocation strategy.

Focused on first-time buyer and move-up segments. Supply/demand dynamics remain favorable. Management expects demand to remain resilient through the remainder of the year given tight inventory levels and favorable demographic trends. Continues to transition toward offering move-in ready homes with a 60-day closing guarantee to compete against existing inventory, which, along with shareholder returns and current net debt/capital of 6.2% being well under the maximum net ceiling of mid-20s range could result in releveraging; that said, balance sheet still strong. OW on RV

Baa3/BBB-/BBB-
Home Construction - Americas
$0.75bn in index across 2 issues ($0.45bn 144a)

28
Q

TOLL BROTHERS FINANCE CORP. (TOL)

A

Toll Brothers is a luxury homebuilder with a focus on high-end residential properties. Strengths include a strong market position and solid financial performance. However, it faces risks from the cyclical nature of the housing market and high leverage

5th largest US homebuilder by revenue; leadership in the luxury market (backlog $7.38bn at F2Q24 -12% y/y; avg price per home $1mn). $2.7bn of liquidity as of F2Q24 and net debt to cap of 18.7% vs. 21.4% at F1Q24. Fiscal 2024 guidance deliveries of 10.4-10.8k units (prior guide 10.0-10.5k) vs. fiscal 2023 9.597k

Baa3(Pos)/BBB-/BBB
Home Construction - Americas
$1.60bn in index across 4 issues

29
Q

BOYNE USA INC (BIGSKY)

A

Operates a variety of ski resorts and golf courses across the U.S. Their business model includes providing hospitality services and outdoor recreational activities. Financially, Boyne USA focuses on maintaining a strong market presence and generating consistent revenue from their diverse portfolio of resorts.

Low snowfall driving near term softness which presents a buying opportunity, but largely expect stable fundamentals over 12-18 months

B1/B
Lodging & Leisure - Americas
$0.69bn in index across 1 issues

30
Q

HILTON GRAND VACATIONS BORROWER LLC (HGV)

A

Operates as a special purpose entity for issuing debt securities to finance acquisitions and refinance existing debt. Their business model supports Hilton Grand Vacations’ broader strategy of expanding their vacation ownership business. Financially, they benefit from strong backing by Hilton Grand Vacations and strategic debt management.

Expect stable fundamentals, but prefer to own TNL secureds given current spread levels.

B2/B+/BB
Lodging & Leisure - Americas
No USD Bonds Outstanding

31
Q

HYATT HOTELS CORP (H)

A

Hyatt operates in the hospitality industry, managing and franchising luxury hotels worldwide. Strengths include a solid balance sheet and a growing asset-light earnings mix. However, it faces challenges from its smaller scale relative to peers and high exposure to the cyclical nature of the travel industry

Baa3/BBB-/BBB-
Lodging & Leisure - Americas
$2.64bn in index across 6 issues

32
Q

MARRIOTT INTERNATIONAL INC (MAR)

A

Marriott is a global leader in the hospitality industry, operating and franchising a broad portfolio of hotels. It benefits from strong brand recognition and a diverse revenue base. Weaknesses include high leverage and vulnerability to economic downturns affecting travel demand

Baa2/BBB
Lodging & Leisure - Americas
$10.10bn in index across 14 issues

33
Q

NORWEGIAN CRUISE LINE HOLDINGS (NCLH)

A

Leading global cruise company with a fleet of 28 ships under the Norwegian Cruise Line, Oceania Cruises, and Regent Seven Seas Cruises brands. Their business model revolves around offering diverse itineraries to over 490 destinations worldwide, with a focus on providing flexible and premium cruising experiences.

Still prefer CCL given expectation for IG ratings eventually while NCLH is expected to remain HY.

Caa1/B/CCC+
Lodging & Leisure - Americas
$4.94bn in index across 6 issues

34
Q

ROYAL CARIBBEAN CRUISES LTD (RCL)

A

Global cruise vacation company headquartered in Miami, Florida. It operates several well-known cruise brands, including Royal Caribbean International, Celebrity Cruises, and Silversea Cruises. Royal Caribbean differentiates itself through its innovative ship designs and diverse itineraries, catering to a wide range of customer preferences.

Upgrade candidate. Cruise demand has driven bookings, pricing and EBITDA all to record levels with leverage dropping through upgrade thresholds every 3-6 months. Expect an upgrade to IG by the end of 2025 barring a meaningful dropoff in demand

Ba2(Pos)/BB+
Lodging & Leisure - Americas
$10.90bn in index across 11 issues

35
Q

TRAVEL + LEISURE CO (TNL)

A

Operates in the vacation ownership and travel services industry, offering timeshare and travel products. Their business model includes leveraging their extensive network of resorts and travel services to provide comprehensive vacation experiences. Financially, Travel + Leisure benefits from recurring revenue from timeshare sales and strong brand recognition.

Continue to prefer secured TNL paper vs unsecured bonds from other timeshare operators.

Ba3/BB-/BB+
Lodging & Leisure - Americas
$2.40bn in index across 5 issues

36
Q

VIKING CRUISES LTD (VIKCRU)

A

Operates river and ocean cruises worldwide, focusing on providing high-quality travel experiences. Their business model includes offering culturally enriching itineraries and premium services. Financially, Viking Cruises benefits from strong demand for luxury travel and strategic fleet expansion.

Prefer Viking unsecureds to the secureds given the collateral package and spreads, but view both as attractive relative to opportunities elsewhere in my coverage.

Ba2/BB
Lodging & Leisure - Americas
$3.07bn in index across 5 issues

37
Q

WYNDHAM HOTELS AND RESORTS (WH)

A

Operates a portfolio of hotel brands, including economy and midscale segments. Their business model focuses on franchising and managing hotels to provide consistent quality and service. Financially, Wyndham benefits from strong brand recognition and a diversified portfolio of properties.

Ba2/BB-/BB+
Lodging & Leisure - Americas
$0.50bn in index across 1 issues

38
Q

CARNIVAL HOLDINGS (BERMUDA) LTD (CCL)

A

World’s largest cruise operator. The company operates a diverse fleet of cruise ships under various brands, offering a wide range of vacation experiences. Carnival differentiates itself through its extensive global reach and variety of cruise options.

Upgrade candidate. Demand for cruise has driven levels of virtually all drivers, however CCL started from a lower bottom and was slower to recover based on its itinerary mix and RCL’s private island offering. Expect CCL to lag the upgrade timeline of RCL by 6-9 months as a result

B2(Pos)/BB
Lodging & Leisure - Other Developed
$12.40bn in index across 9 issues

39
Q

CUSHMAN & WAKEFIELD US BORROWER LLC (CWK)

A

Cushman & Wakefield is a global real estate services firm. It has strong liquidity and a resilient business model. However, it faces high leverage and exposure to the cyclical nature of the real estate market

BB-(Neg)
Real Estate Services - Americas
$1.05bn in index across 2 issues

40
Q

RE/MAX LLC (RMAX)

A

RE/MAX operates in the real estate industry, providing franchising services to real estate agents. Strengths include a strong brand and extensive franchise network. Weaknesses include exposure to the cyclical housing market and competitive pressures

–
Real Estate Services - Americas
No USD Bonds Outstanding

41
Q

DARDEN RESTAURANTS INC (DRI)

A

Darden operates a portfolio of full-service restaurants, including Olive Garden and LongHorn Steakhouse. It benefits from strong brand recognition and stable cash flows. However, it faces risks from high leverage and the competitive nature of the restaurant industry

Baa2/BBB/BBB
Restaurants - Americas
$1.30bn in index across 3 issues

42
Q

MCDONALDS CORPORATION (MCD)

A

McDonald’s is a leading global fast-food chain. It benefits from a strong global brand and stable cash flows. However, it faces high leverage and ongoing investments in technology and restaurant modernization

2Q mixed on all key metrics. Top line results decelerating driven by lower pricing benefits, trade down (low income consumer) and impact from ME conflict (i.e. France). Guided to traffic below historical levels. Spreads should trade on top of SBUX. View risk/reward as unattractive with mid-term risk from GLP-1

Baa1/BBB+
Restaurants - Americas
$23.05bn in index across 28 issues

43
Q

STARBUCKS CORPORATION (SBUX)

A

Starbucks is a global coffeehouse chain known for its premium coffee and customer experience. Strengths include strong brand loyalty and consistent revenue growth. Weaknesses include high operating costs and exposure to fluctuating commodity prices

3Q results mixed with operating effeiciencies helping costs. The company is facing pressure in China from lower end competitors and ‘very occasional’ customers who have not returned in the US as traffic remains challenged. Other risks include: unionization in the US, success and investment in Reinvention plan. We remain cautious on the path of recovery for the credit and would sit on the sidelines until SBUX shows operating stability/improvements. Announced new CEO very well received by market

Baa1/BBB+
Restaurants - Americas
$15.70bn in index across 20 issues

44
Q

7-ELEVEN INC (SVELEV)

A

Operates a global chain of convenience stores, offering a variety of products including snacks, beverages, and prepared foods. It is well-known for its strong brand recognition and extensive global footprint. The company’s strengths include consistent revenue from its widespread store network. However, it faces high competition in the convenience store sector and operates with thin profit margins.

Baa2/A
Retailers - Americas
$5.95bn in index across 5 issues ($5.95bn 144a)

45
Q

ALIMENTATION COUCHE-TARD INC (ATDBCN)

A

Operates convenience stores and gas stations under various banners, including Circle K, across North America, Europe, and Asia. It is differentiated by its strong cash flow generation and diversified geographic presence. The company’s strengths include robust cash flows and a diversified geographic footprint. Its weaknesses include exposure to fuel price volatility and regulatory risks in different markets.

Baa1/BBB+
Retailers - Americas
$5.50bn in index across 8 issues ($5.50bn 144a)

46
Q

AMAZON.COM INC (AMZN)

A

Global e-commerce and cloud computing giant, offering a vast range of products and services, including AWS. It is positioned as a dominant player in both e-commerce and cloud services. Amazon’s strengths include a dominant market position and strong revenue growth from diverse business segments. However, it has high capital expenditure and thin profit margins in its retail segment.

A1/AA/AA-
Retailers - Americas
$55.12bn in index across 26 issues

47
Q

COSTCO WHOLESALE CORPORATION (COST)

A

Operates membership warehouses offering a wide range of products at low prices, driving high sales volumes and rapid inventory turnover. It is known for its strong membership model and high sales volumes. Costco’s strengths include stable cash flows from its membership model. Its weaknesses are low profit margins and reliance on membership renewals for revenue stability.

Aa3/A+
Retailers - Americas
$5.00bn in index across 4 issues

48
Q

DOLLAR TREE INC (DLTR)

A

Operates discount variety stores under the Dollar Tree (middle- to higher-income consumers) and Family Dollar (lower-income) brands, offering a wide range of products at low prices. It is positioned as a leader in the discount retail sector with an extensive store network. The company’s strengths include a strong market position and extensive store network. However, it operates with thin profit margins and is sensitive to economic downturns.

Baa2/BBB/BBB
Retailers - Americas
$2.45bn in index across 3 issues

49
Q

HOME DEPOT INC (HD)

A

Largest home improvement retailer in the world, serving both DIY customers and professional contractors through over 2,300 stores in North America. It is well-positioned in the market due to its extensive product range and strong brand recognition. The company’s strengths include consistent revenue growth and a robust market position, which provide stable cash flows. However, its high dependency on the U.S. housing market makes it vulnerable to economic downturns.

2Q mixed and lowers FY guidance. Big ticket discretionary purchases remain under pressure with a focus on smaller projects. Home improvement expected to remain under pressure this year (LSD decline), but key drivers (age of housing stock, home shortage, WFH… remain intact and should drive results in the future. Pro position remains strong (50% of sales ~10% of customer base). PF SRS leverage (~2.5x) should grind tighter back to 2x (24 months post close

A2/A/A
Retailers - Americas
$49.45bn in index across 43 issues

50
Q

LOWES COMPANIES INC (LOW)

A

Leading home improvement retailer with over 1,700 stores in the U.S. and Canada, catering to both retail customers and professional contractors. It differentiates itself through a focus on customer service and a wide product assortment. Lowe’s strengths lie in its solid cash flows and healthy balance sheet, supporting its creditworthiness. Its weaknesses include exposure to economic cycles and competitive pressures from Home Depot.

LOW is facing many of the similar challenges as HD, although LOW’s larger DIY reliance (75% sales) amplifies the challenge as the consumer remains focused on experiences. LOW is modestly above its target leverage of 2.75x (2.9x - could rise modestly this year with a decline in EBITDA) and expect LOW to repay the $450M maturity this year with FCF. LOW could also pay down a portion of ‘25 debt ($2.5B) to maintain leverage. LOW looks attractive vs high quality BBB peers and should trade 20bps back of HD (Pre-SRS announcement).

Baa1/BBB+
Retailers - Americas
$32.93bn in index across 33 issues

51
Q

RALPH LAUREN CORP (RL)

A

Global leader in the design, marketing, and distribution of premium lifestyle products, including apparel and accessories. It is well-known for its strong brand equity and diversified product lines. Ralph Lauren’s strengths include strong brand equity and diversified product lines, enhancing market stability. Its weaknesses are high exposure to fashion trends and economic cycles, which can impact sales.

A3/A-
Retailers - Americas
$1.15bn in index across 2 issues

52
Q

TARGET CORPORATION (TGT)

A

General merchandise retailer with over 1,900 stores in the U.S., offering a wide range of products from groceries to electronics. Target is known for its strong brand recognition and customer loyalty. The company’s strengths include steady revenue streams and a loyal customer base. However, it faces intense competition from other big-box retailers and e-commerce giants like Amazon.

2Q beat across all metrics. Margins improving driven by cost improvements and imrpoved shrink; EBITDA improving and inventory levels stable. FY25 comparable sales guidance of 0 to 2% y/y highlights another solid step in Target’s recovery. Elevated shrink improving y/y in FY25 benefitting GM, as leverage is on target to be 1.9x by YE. Should trade flat to HD.

A2/A/A
Retailers - Americas
$11.37bn in index across 15 issues

53
Q

VF CORPORATION (VFC)

A

Global apparel and footwear company, owning brands like Vans, The North Face, and Timberland. It is positioned as a leader in the lifestyle apparel market with a diversified brand portfolio. VF Corporation’s strengths include a strong global presence and a diversified brand portfolio, enhancing market stability. Its weaknesses are exposure to fashion trends and economic fluctuations, which can impact sales and profitability.

1Q results exceed low bar. The credit has several challenges, but the biggest challenge is reviving the Vans brand. Negative y/y results by Vans and The North Face doesn’t bode well, although the decline is stabilizing/modest improvement. Further, weaker consumer in growth markets (Europe and China) could further derail the turnaround. VF’s focus on reducing costs ($300mm) and repaying debt rather than refinancing it in the near-term are credit positives, but without a recovery in the top-line a downgrade seems likely. Remain cautious on Moody’s patience with the company and believe they may push ratings into HY this year if numbers continue to disappoint. Spreads are relatively wide - would need to look at M/KSS for modestly wider levels. Downgrade candidate: Overlevered, pressured brands and no near/medium-term path to delever below downgrade triggers

Baa3(Neg)/BBB-(Neg)
Retailers - Americas
$1.25bn in index across 2 issues

54
Q

WALGREENS BOOTS ALLIANCE INC (WBA)

A

Operates as a global pharmacy-led health and wellbeing enterprise, with a presence in over 25 countries. It is positioned as a major player in the pharmacy sector with an extensive global footprint. The company’s strengths include a strong market position and extensive global footprint. However, it faces regulatory risks and competitive pressures from other pharmacy chains and online retailers.

B1/BB
Retailers - Americas
$4.51bn in index across 7 issues

55
Q

WALMART INC (WMT)

A

World’s largest retailer, operating a chain of hypermarkets, discount department stores, and grocery stores. It is known for its dominant market position and extensive product range. Walmart’s strengths include strong revenue growth and stable cash flows. Its weaknesses include intense competition from e-commerce giants like Amazon and regulatory challenges in various markets.

Aa2/AA/AA
Retailers - Americas
$30.02bn in index across 32 issues

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