09:10 | New York (U.S.), Aug. 28.
Improving global conditions have spurred stable or upwardly revised forecasts for corporate credits in 2018, according to a series of new Fitch Ratings reports.
"Emerging APAC is showing the strongest improvement in expected performance, and pressure on Western European forecasts is modest," he added.
U.S. corporate forecasts are unchanged on stable credit fundamentals and strong global growth prospects.
Upward forecast revisions are mostly linked to higher commodity prices
. Median leverage is expected to decline to 3.6x by the end of 2018, driven by EBITDA improvement and debt paydown. A renewed, aggressive pace of M&A activity could alter the forecasts.
For Europe, the Middle East, and Africa (EMEA), Fitch has revised leverage expectations upward, driven by industrial; consumer and healthcare; technology, media, and telecommunications.
Pharmaceuticals has the biggest year-over-year increase in median leverage forecast, reflecting the completion of Bayer/Monsanto merger, a recent surge in debt-funded investments, and traditionally high shareholder returns.
The Middle East and Africa show the largest decrease in leverage compared to last year, on the improved leverage metrics of utilities and transport.
Asia-Pacific (APAC) leverage forecasts were revised down by 0.3 turns to 1.7x. The revenue growth forecast increased to 9.1%, and the EBITDAR margin forecast rose by 1% to 17%.
The improvement was driven by revised projections in basic materials and energy, which slightly offset higher leverage expectations for real estate and retail, leisure, and consumer products.
For Latin America, median free cash flow expectations are close to neutral, with a margin forecast of 0.2% in the second-quarter 2018, down from 0.7% last year.
Forecast median free cash flow improved for chemicals; natural resources; aerospace and defense; technology, media, and telecommunications.
Year-end 2018 median net leverage forecasts remain mostly unchanged at 2.7x in second-quarter 2018 from 2.6x last year.