Fitch Ratings has affirmed Motorola Solutions debt rating at BBB and said that the outlook is stable. The rating actions affect approximately $2.5 billion of total debt.
The ratings and Outlook reflect Fitch's expectations for improved operating performance over the intermediate term, including a resumption of pre-dividend annual free cash flow (FCF) of more than $500 million. Fitch expects low single digit organic revenue growth, supported by a strong backlog of business in government and the anticipation of gradually improving enterprise spending.
Ongoing restructuring actions should support operating profit margins at near current record levels in excess of 15% over the intermediate term. Fitch expects Motorola Solutions' operating profit margin will reach 17% in 2014 but believes the company achieving its 19% target will require continued restructuring and a favorable sales mix, given lower gross margins of and expectations for a growing services business.
Credit protection measures to remain solid for the rating, driven by Fitch's expectations for consistent debt and profitability levels. Fitch forecasts total debt to operating EBITDA will end 2013 at 1.5 times (x) and remain below 2.0x over the intermediate term. Operating EBITDA to gross interest expense should remain comfortably above 10.0x.
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