Fitch lowers corporate revenue projections, citing macro risks

Fitch Ratings has revised its revenue forecasts for non-financial corporates down, citing expectations for slower global economic growth.

In a new report, the rating agency cut its revenue growth forecasts for corporate issuers amid its projections that global GDP growth will slow to 1.4% this year from an estimated 2.6% for 2022.

“The eurozone and U.K. are likely to have entered recessions in late 2022, with the U.S. following in mid-2023, as high inflation prompts more interest rate hikes, consumer spending slows and unemployment rises,” it said.

“Macroeconomic challenges will be the dominant theme for global corporates in 2023, as demand erosion and weakening pricing power affect corporate profitability,” it noted.

Additionally, Fitch said it expects corporate defaults to rise as credit markets tighten.

Against this backdrop, Fitch reduced its aggregate revenue growth forecasts for rated corporate issuers by seven percentage points (pps) in the EMEA region, by five pps in Latin America, three pps in the Asia Pacific region, and two pps in North America.

“Performance and expectations vary widely by sector,” it noted. “Downward revisions to revenue have been greatest in the energy and natural resources sector, given our assumption that commodity prices will ease from cyclical highs.”

The less-affected industries include the airlines and aerospace and defence sectors, “which continue to recover from pandemic lows, and countercyclical sectors like food, beverage and tobacco, and health care.”

Fitch noted that 43% of sector credit outlooks are deteriorating, but that rating outlooks remain “stable” for over 80% of the non-financial corporate issuers it rates.

The high percentage of stable outlooks is “largely due to leverage headroom at current rating levels,” it said.

James Langton

James is a senior reporter for Advisor.ca and its sister publication, Investment Executive. He has been reporting on regulation, securities law, industry news and more since 1994.