Outlook for the future is for steady performance but little chance of a big turnaround
Echo Global Logistics has managed to hold its debt rating at Moody’s as the ratings agency said it expects the company, even in the midst of the current freight market, to “maintain steady earnings and adequate liquidity.”
The corporate family rating at Moody’s for Echo Global was maintained at B3. That rating is considered equivalent to a B- at S&P Global Ratings. S&P Global (NYSE: SPGI) has had Echo Global at that level for approximately two years after a downgrade.
Moody’s (NYSE: MCO) also affirmed Echo’s probability of default rating at B3-PD and senior secured bank credit facilities rating at B2, a notch higher than the corporate family rating.
The ratings agency also held the company’s outlook at stable.
Both the Moody’s B3 rating and an S&P B- rating are six notches into non-investment grade territory.
Echo Global has been in the public debt markets for approximately four years. Moody’s gave it a B2 rating when Echo Global first issued publicly traded debt, and downgraded it to B3 in November 2023, not long after S&P Global had made its downward shift.
Its move into debt markets came after the once publicly-traded company announced its acquisition by The Jordan Co.
While the Moody’s report does not provide any figures on revenue or profitability, which is standard practice, its general comments suggest a 3PL that is holding its own in the current freight market but with only a small chance of an imminent turnaround.
“Echo has demonstrated modest freight volume growth despite soft economic conditions, particularly in the manufacturing sector where the company derives a good portion of freight activity,” Moody’s said in its report. “Nonetheless, Echo’s credit metrics, including financial leverage and interest coverage, remain weak. Therefore, we believe the company’s financial flexibility is limited until broader freight market conditions improve.”
A summation of Echo Global’s economics said it was a company that had “low profit margin, high leverage, and expectations for modest free cash flow over next 12 months.” But the report also said Moody’s believes Echo Global “will maintain steady earnings and adequate liquidity as it continues to navigate a persistently challenging freight trucking environment.”
EBITDA margins at Echo Global are usually 3%-5%, Moody’s said. As a point of comparison, RXO (NYSE: RXO), which is a publicly-traded 3PL, reported a second quarter EBITDA margin of 2.7%, compared to 3% a year earlier.