S&P Global Ratings downgraded TTM Technologies Inc.'s outlook to stable from positive while affirming the company's 'BB' issuer credit rating, citing the impact of its planned $1.1 billion acquisition of Epiq Solutions.
The rating action reflects S&P's view that the acquisition, expected to be financed primarily with debt, will temporarily increase leverage and introduce integration risks. Pro forma net leverage is projected to rise to the high-2x area upon closing in the fourth quarter of 2026, up from the low-1x area projected for 2025. S&P expects leverage to decline to the high-1x area by year-end 2027 as EBITDA margins improve and business performance strengthens.
TTM Technologies has not pursued significant acquisitions in recent years, with its last major deal occurring in 2022. The Epiq Solutions acquisition represents the company's third deal in recent months. S&P warned that additional debt-funded acquisitions or adverse market conditions could pressure leverage above 3x, potentially leading to a downgrade. Conversely, sustained adjusted net leverage below 2x could support an upgrade.
S&P projects nearly 50% revenue growth in 2026, driven by demand for AI data center infrastructure, followed by mid-teens percent growth in 2027. EBITDA margins are expected to expand to near 20% in 2027, supported by improved operational efficiency. Free operating cash flow to debt is noted at around 15%, a benchmark for potential rating upgrades.
TTM's free operating cash flow is expected to remain constrained in 2026 due to growth investments and elevated working-capital requirements, resulting in modestly negative free operating cash flow. Capital expenditures are projected to exceed $370 million in 2026, with free operating cash flow generation expected to surpass $250 million in 2027 as margins improve.
