Moody’s has weighed in on two logistics providers in recent days, and the word from the influential provider of debt ratings was positive both times.
In an announcement last week, Moody’s (NYSE: MCO) said it was increasing its senior unsecured rating on GXO (NYSE: GXO) by one notch to Baa3 from Ba1. But the significance is not just that GXO is one notch higher. It is that Baa3 is the first notch above the Moody’s cutoff between investment grade and non-investment grade debt which means that in the eyes of Moody’s, GXO is no longer a junk credit.
The second step occurred Monday. It isn’t a change. But the agency affirmed the debt rating of C.H. Robinson (NASDAQ: CHRW) at Baa2, two notches above the cutoff line between investment and non-investment grade debt. Moody’s cited the giant 3PL’s “disciplined approach to managing its balance sheet and financial leverage.”
The agency also said it believes Robinson’s “strong market position in the U.S. freight brokerage market will continue to drive solid and consistent results despite a difficult operating environment, including flat volumes and weak pricing dynamics.”
The increase in GXO’s rating put the contract logistics provider at a level considered equivalent to the BBB- rating that S&P Global Ratings (NYSE: SPGI) has had on GXO for several years.
However, S&P Global Ratings reduced its outlook on GXO to negative in March 2024 when the company acquired Wincanton last year, a U.K.-based contract logistics provider in that country. The negative outlook remains, which is often a first step toward a downgrade.
By contrast, the new Moody’s rating for GXO comes with a stable outlook. The outlook had been positive, which is often a precursor to an increase in a company’s debt rating.
GXO is a publicly traded company so its finances are no secret. Ratings actions by the agencies for companies that are privately-owned but with publicly-traded debt can offer a window into finances that might not otherwise be available.
GXO’s stock for the past year has been weak, falling about 3.9%. But it has been on a positive run of late with a 3-month increase of about 23.4% and 1-month increase of just under 18%. It was one of the strongest logistics stocks in the second quarter.
S&P’s move to take a negative outlook on GXO came when it announced not only the acquisition of Wincanton but also its almost $1 billion financing plan. But Moody’s view, more than a year later, is more positive.
