ADT Inc. (ADT) Upgraded to 'BB' by S&P Global Ratings Due to Improved Credit Metrics and Reduced Ownership by Financial Sponsor Apollo.

S&P Global Ratings has upgraded ADT Inc.'s credit rating to 'BB' due to improvements in the company's credit metrics and a reduction in ownership by financial sponsor Apollo. The rating firm expects ADT to pursue a financial policy focused on improving cash flows and disciplined capital allocation. ADT's revenues are increasing despite a flat subscriber count. The company provides home and business security solutions, including security systems, personal safety monitoring, and medical alarms.

S&P Global Ratings has upgraded ADT Inc.'s credit rating to 'BB', reflecting improvements in the company's credit metrics and a reduction in ownership by financial sponsor Apollo. The rating firm expects ADT to pursue a financial policy focused on improving cash flows and disciplined capital allocation. This upgrade comes despite a flat subscriber count, indicating that ADT's revenues are increasing through other means.

ADT Inc. provides home and business security solutions, including security systems, personal safety monitoring, and medical alarms. The company's credit rating upgrade suggests that investors and lenders view ADT as a more stable investment due to its improved financial metrics and reduced ownership by Apollo. This upgrade could lead to lower borrowing costs and increased access to capital for ADT, potentially fueling further growth.

In the latest quarter, ADT's customers came in at 6.4 million, with a 2.1% year-over-year decline over the past two years. This suggests that while ADT's customer base is stable, it may be facing increasing competition or market saturation. Despite this, ADT's revenues have been increasing, indicating that the company is finding new ways to generate revenue. This could be through price increases, new product offerings, or improved service packages.

ADT's projected revenue growth for the next 12 months is 3.6%, which is below the average for the sector. However, this growth is expected to be fueled by newer products and services, suggesting that ADT is investing in innovation. The company's return on invested capital (ROIC) has historically been low, at 5.7% over the past five years. This indicates that ADT has not been capital-efficient in its growth initiatives. However, the company's recent focus on improving cash flows and disciplined capital allocation could lead to improved ROIC in the future.

The 'BB' rating suggests that ADT is a speculative-grade investment, with a higher risk of default. However, the company's recent performance and the expected focus on improving cash flows and disciplined capital allocation could make it an attractive investment for those willing to take on higher risk. The upgrade also indicates that ADT's shares could be undervalued, given their current valuation of 9.8 times forward P/E.

References:
[1] https://www.ainvest.com/news/smartrent-strategic-shift-saas-balancing-term-pain-long-term-gain-2508/
[2] https://finance.yahoo.com/news/adt-adt-buy-sell-hold-040234214.html