S&P Downgrades Hyster-Yale Rating Outlook Due to Elevated Leverage Ratios

Investing.com - S&P Global Ratings today downgraded the outlook for Hyster-Yale Inc. (NYSE:HY) from Stable to Negative, while affirming its “B” issuer credit rating. The rating agency noted that the company’s leverage ratio is expected to remain above its 5x downside threshold for at least the next one to two quarters, amid increasing demand uncertainty and cost pressures, including tariffs.

Following the rating adjustment by S&P Global Ratings, Hyster-Yale’s EBITDA margin is projected to shrink from 8.4% in 2024 to 2.2% in 2025, with leverage rising from 1.6x to 8.1x as of December 31, 2025. This deterioration is driven by a significant decline in forklift sales, unresolved tariff costs, and increased borrowing. The company’s revenue is expected to fall 12.5% to $3.7 billion in 2025, due to a weak forklift market, customer preference shifting toward lower-priced products, and aggressive pricing strategies by global competitors.

S&P Global Ratings expects market conditions to improve in 2026, with adjusted EBITDA margins reaching 3.6% and year-end leverage decreasing to 4.3x. This forecast is based on a mild market recovery, cost-cutting initiatives, and operational measures that are projected to increase adjusted EBITDA from $83 million in 2025 to $144 million. Hyster-Yale reported approximately 15% quarter-over-quarter order growth in Q3 2025, and a 42% increase in Q4.

The rating agency anticipates that improvements in credit metrics will be concentrated in the second half of 2026. Cost reduction plans and operational initiatives include manufacturing footprint optimization, automation, and organizational restructuring focused on streamlining internal functions. Capital expenditure commitments involve investing in expanding modular and technological product lines, upgrading IT infrastructure—including new enterprise resource planning systems—and optimizing manufacturing footprint.

S&P Global Ratings believes that despite operational challenges, Hyster-Yale maintained positive free operating cash flow in 2025, partly due to working capital inflows from inventory releases caused by declining sales. The agency expects free operating cash flow to remain positive in 2026, though EBITDA will only see modest year-over-year growth despite higher levels, as the role of working capital as a cash source diminishes and capital expenditures remain high.

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