For the second time this yr, Moody’s Traders Service has downgraded the debt score of trailer producer Wabash Nationwide.
The most recent transfer takes the corporate’s company household score (CFR) to B2 from B1. Different adjustments carried out by Moody’s Wednesday had been to take Wabash’s likelihood of default score to B2-PD from B1-PD, and to chop its senior unsecured notes score to B3 from B2.
Moody’s additionally saved the outlook on Wabash (NYSE: WNC) at unfavorable. Whereas this isn’t uncommon, it’s usually the case on the scores businesses that an organization that had been on a unfavorable credit score watch sees the unfavorable outlook disappear when the downgrade is carried out (or a constructive outlook strikes to steady after an improve).
A unfavorable outlook means a “the next probability that the credit standing might change within the medium time period,” in keeping with the scores company.
Moody’s (NYSE: MCO) had lowered Wabash’s CFR score to B1 from Ba3 in Could. Its transfer occurred at roughly the identical time that S&P World Rankings (NYSE: SPGI) additionally had lowered its score on Wabash to B+ from BB-. That B+ score is taken into account equal to Moody’s B1 score. As of Thursday, the S&P World score was nonetheless in place, one notch greater than the brand new score from Moody’s.
5 steps beneath funding grade
The B2 score at Moody’s is 5 notches lower than the cutoff between funding grade and non-investment grade debt. The S&P World is 4 notches beneath the cutoff.
“The score downgrade displays our expectation that Wabash’s credit score metrics will stay weak over the subsequent 12 months,” Moody’s wrote in its report. “Wabash’s earnings have considerably deteriorated amid a protracted down cycle in truck trailer manufacturing as the corporate’s prospects defer investments of their transportation fleets.”
In its newest earnings launched final week, Wabash mentioned it shipped 6,940 trailers within the third quarter in comparison with 7,585 within the third quarter of 2024. Truck physique shipments had been 3,065 versus 3,630 a yr earlier.
Within the earnings report, the corporate mentioned its backlog of $829 million on the finish of the third quarter was the results of a “wait and see” strategy at its prospects.
Purple ink within the third quarter
The Transportation Options section at Wabash, which incorporates its container operations, had a 3rd quarter working lack of $13.1 million, in comparison with working earnings of $29.1 million a yr earlier.
Moody’s rationale for the discount and the continued unfavorable outlook is rooted in its forecast. “We count on delicate finish market demand to stretch into 2026 based mostly on decrease order backlogs, although we do anticipate trailer manufacturing will progressively recuperate over the course of subsequent yr supported by pent up substitute wants of fleets,” the Moody’s report mentioned. “Nonetheless, given the decline in Wabash’s earnings in 2025, a restoration within the firm’s credit score metrics will possible prolong into 2027 after we count on extra significant development in trailer manufacturing volumes to happen.”
Each S&P World and Moody’s had earlier expressed concern in regards to the nuclear verdict that originally hit Wabash with a greater than $400 million verdict in September 2024. That was lower down first by a Missouri choose after which additional in a settlement final month. However Moody’s mentioned Wabash will nonetheless be on the hook for a $30 million cost.
No income bounceback in 2026
Wabash’s 2025 income is down 20.1% from a yr earlier. Moody’s mentioned it expects that decline to carry by the top of the yr after which be repeated in 2026.
“The steep falloff in income displays decrease demand for brand spanking new truck trailer manufacturing following an
prolonged substitute cycle within the instant post-pandemic years,” the Moody’s report mentioned. “Additional, lingering uncertainty round US tariffs has brought on transportation fleets to gradual or defer spending on new truck trailers and our bodies.”
Wabash has been touting the success of its Elements and Service section, together with its comparatively new Trailers as a Service providing that permits entry to trailer capability by prospects with out proudly owning the trailer, however below circumstances that differ from a standard long-term lease of a trailer.
The important thing benchmark for the scores businesses is debt to EBITDA. Moody’s mentioned Wabash was at 1X in that class at the beginning of the present freight downturn. By the top of subsequent yr, the scores company mentioned it expects that quantity can be as much as 5X. It then sees the quantity coming again to 3X by the top of 2027.
Wabash’s third quarter earnings report mentioned the corporate’s money and money equivalents had dropped to $91.7 million on the finish of the third quarter from $155.5 million on the finish of 2024. However Moody’s mentioned it was assured within the firm’s liquidity because it additionally has $264 million in a revolving credit score facility and different capital.
However Moody’s additionally mentioned it expects Wabash to have unfavorable free money stream into 2026.
Wabash’s inventory closed Thursday at $7.76. It’s down about 59.5% within the final yr. Its 52-week excessive was December 11 at $20.63.
A spokeswoman for Wabash mentioned the corporate declined touch upon the Moody’s report.
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