Investing.com -- S&P Global Ratings has upgraded Visteon Corp. to 'BB+' from 'BB' with a stable outlook, citing the auto supplier's stronger margins and improved business profile.
The rating agency noted that Visteon has fundamentally improved its cost structure, achieving low- to mid-teens percentage EBITDA margins over the past 12 months, exceeding its 2023 EBITDA margins of 11.4%. These improvements came through cost base resetting, lower engineering spending, and better cost discipline.
Within North America, Visteon has successfully mitigated most direct tariff costs through U.S.-Mexico-Canada Agreement compliance and by negotiating recoveries with customers for remaining exposure.
The company maintained these stronger margins despite S&P's forecast for a 1%-3% decline in global light vehicle production in 2025, demonstrating its ability to sustain improved performance in challenging market conditions.
Revenue for the trailing 12 months ended in the second quarter of 2025 declined 3.3% year over year due to lower automaker production volume, slower-than-expected electric vehicle adoption, and global automaker share decline in China.
Despite market challenges, Visteon has maintained a strong pipeline of new business. First-half 2025 business wins reached $3.9 billion, exceeding the $3.1 billion from the same period last year.
S&P forecasts a full-year 2025 sales decline of about 2.4%, with improved second-half sales supported by new product launches in China, benefits from a recent acquisition, and foreign exchange advantages, partially offset by lower battery management system sales.
The rating agency expects Visteon to generate EBITDA margins of 13.2% in fiscal 2025, resulting in an expected net leverage of 0.3x for the year.
Looking ahead, S&P anticipates 2% revenue growth in 2026 as Visteon capitalizes on new launches and product innovation. The company is expected to leverage its software and AI capabilities, expand into commercial vehicle digitalization, and further penetrate the two-wheel market in Asia.
Visteon recently acquired an engineering service company in the second quarter to strengthen its innovation capabilities and initiated a dividend starting in the third quarter of 2025 while continuing share repurchases.
S&P believes the company generates sufficient free operating cash flow to fund tuck-in acquisitions and shareholder returns while maintaining adjusted net leverage below 2x.