Recipient email addresses will not be used in mailing lists or redistributed.
Use semicolon to separate each address, limit to 20 addresses.
characters you see
You have successfully sent the research.
Please note: some research requires a paid subscription in order to access.
Global Credit Research - 13 Jul 2011
New York, July 13, 2011 -- Moody's Investors Service affirmed all ratings, including
the Aaa long-term ratings, of Automatic Data Processing,
Inc., ("ADP"), Exxon Mobil Corporation
("ExxonMobil"), Johnson & Johnson ("J&J"),
and Microsoft Corporation ("Microsoft") -- the
four U.S. based non-financial companies rated at
the Aaa level -- following the action that placed the U.S.
government's Aaa rating under review for possible downgrade.
The rating outlook is stable for ADP, ExxonMobil and Microsoft,
and remains negative for J&J.
RATIONALE FOR AFFIRMATION
Each of the companies exhibits characteristics, to varying degrees,
that could enable its Aaa long-term rating to be sustained as much
as 2-3 notches above the U.S. government's
ADP, ExxonMobil, J&J, and Microsoft provide products
and services that are essential to their customers, and set world-class
standards for market position, margins and efficiency. Moody's
expects these companies to continue to generate superior earnings and
cash flow. While financial performance fluctuates somewhat along
with trends for their industries and the broad economy, these companies
have substantial capacity to generate free cash flow under a wide range
of conditions. As a result, their operations are self-funded
without reliance on the government or the domestic banks, and these
companies would be expected to access the debt capital markets to fund
only large strategic investments. Direct U.S. government
exposure is minimal, as these firms have a diversified customer
base with substantial revenue derived from outside the U.S.
Debt levels of each company are very modest relative to normalized cash
flow. Moreover, each company has amassed a considerable cash
stockpile to ensure ongoing investment and to meet obligations in the
face of unforeseen disruptions to its business.
ADP (Aaa, stable) is deeply entrenched in its customers' payroll
processing operations. Cash flow predictability from high customer
retention, recurring revenues and low capital expenditures generates
superior profit margins and enables conversion of about 40% of
EBITDA to free cash flow annually. With about 550,000 customers,
we estimate that ADP derives less than 1% of its approximate $10
billion in revenues from government sources. Overseas clients account
for 20% of revenues and provide very sizeable non-U.S.
cash flow sources relative to ADP's $35 million of long-term
debt. We expect ADP to supplement its cash resources of about $1.7
billion with annual free cash flow of at least $1 billion.
ExxonMobil (Aaa, stable) is the only Aaa-rated company among
a group of highly rated integrated oil peers (Royal Dutch Shell,
Chevron and Total), reflecting its differential position in reserves,
production, financial flexibility, and free cash generation.
Its rating is supported by a massive base of proven oil and gas reserves
that are geographically diversified across the world's major hydrocarbon-producing
regions and also by a position in technology and integrated project expertise
that make it a preferred partner. ExxonMobil generates about 75%
of its earnings after tax outside of the U.S. and over 70%
of its proved reserves are located in foreign countries. The company's
$12.9 billion of cash at March 31, 2011 and substantial
operating cash flow generation provide ample liquidity to manage its debt
maturities, capital spending and dividends. Its exposure
to the U.S. government as a customer is not significant.
For J&J (Aaa, negative), a temporary delay in U.S.
government payments would not substantially affect J&J's financial
position, given its excellent free cash flow and its portfolio of
cash and short-term investments totaling over $26 billion.
J&J maintains limited exposure to the U.S. government
as a direct customer, and J&J's non-U.S.
sales represent over 50% of total revenues. Many of J&J's
customers, however, are reimbursed by government programs,
including Medicare and Medicaid. We estimate that roughly one-fifth
of J&J's revenues are indirectly related to such U.S.
government sources. Therefore, a protracted delay in U.S.
government payments could begin to affect J&J's revenue stream.
In addition, longer-term efforts to reduce the U.S.
budget deficit via reductions in healthcare spending could negatively
affect healthcare companies including J&J. The outlook on J&J's
Aaa rating remains negative, tied to higher leverage resulting from
J&J's acquisition strategy and higher operating risks,
including product quality issues and slow top-line growth.
Microsoft (Aaa, stable) derives a very low single-digit percentage
of its revenue from the U.S. federal government and about
half its total revenue from non-U.S. customers.
Based on good demand conditions and a strong competitive position in mission
critical software applications, Microsoft has very strong free cash
flow that has resulted in the accumulation of $52 billion of cash
and equivalents on its balance sheet.
Please see the ratings tab on the issuer/entity page on Moodys.com
for the last Credit Rating Action and the rating history.
The principal methodology used in rating ADP was the Global Business and
Consumer Service Industry, published in October 2010. The
principal methodology used in rating ExxonMobil was the Global Integrated
Oil & Gas Industry, published in November, 2009.
The principal methodology used in rating Johnson & Johnson was the
Global Pharmaceutical Rating Methodology, published in October 2009.
The principal methodology used in rating Microsoft was the Global Software
Methodology, published in May 2009. Other methodologies and
factors that may have been considered in the process of rating these issuers
can also be found in the Rating Methodologies sub-directory on
Automatic Data Processing, Inc., headquartered in Roseland,
New Jersey, is a worldwide provider of human resources, tax,
benefits, and automotive dealership management software and IT services.
Exxon Mobil Corporation, headquartered in Irving, Texas,
is among the world's largest investor owned integrated oil and gas
companies. Johnson & Johnson, headquartered in New Brunswick,
New Jersey, is one of the world's largest healthcare companies.
Microsoft Corporation, headquartered in Redmond, Washington,
is the world's largest software manufacturer.
For more information on the US government's rating, please
MD-US and Amer Corporate Fin
Corporate Finance Group
Moody's Investors Service, Inc.
MD-US and Amer Corporate Fin
Corporate Finance Group
Moody's Investors Service, Inc.
Moody's Investors Service, Inc.
Moody's affirms Aaa ratings of ADP, ExxonMobil, J&J, and Microsoft
250 Greenwich Street
New York, NY 10007
No Related Data.
© 2017 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their licensors and affiliates (collectively, “MOODY’S”). All rights reserved. CREDIT RATINGS ISSUED BY MOODY'S INVESTORS SERVICE, INC. AND ITS RATINGS AFFILIATES (“MIS”) ARE MOODY’S CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES, AND MOODY’S PUBLICATIONS MAY INCLUDE MOODY’S CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES. MOODY’S DEFINES CREDIT RISK AS THE RISK THAT AN ENTITY MAY NOT MEET ITS CONTRACTUAL, FINANCIAL OBLIGATIONS AS THEY COME DUE AND ANY ESTIMATED FINANCIAL LOSS IN THE EVENT OF DEFAULT. CREDIT RATINGS DO NOT ADDRESS ANY OTHER RISK, INCLUDING BUT NOT LIMITED TO: LIQUIDITY RISK, MARKET VALUE RISK, OR PRICE VOLATILITY. CREDIT RATINGS AND MOODY’S OPINIONS INCLUDED IN MOODY’S PUBLICATIONS ARE NOT STATEMENTS OF CURRENT OR HISTORICAL FACT. MOODY’S PUBLICATIONS MAY ALSO INCLUDE QUANTITATIVE MODEL-BASED ESTIMATES OF CREDIT RISK AND RELATED OPINIONS OR COMMENTARY PUBLISHED BY MOODY’S ANALYTICS, INC. CREDIT RATINGS AND MOODY’S PUBLICATIONS DO NOT CONSTITUTE OR PROVIDE INVESTMENT OR FINANCIAL ADVICE, AND CREDIT RATINGS AND MOODY’S PUBLICATIONS ARE NOT AND DO NOT PROVIDE RECOMMENDATIONS TO PURCHASE, SELL, OR HOLD PARTICULAR SECURITIES. NEITHER CREDIT RATINGS NOR MOODY’S PUBLICATIONS COMMENT ON THE SUITABILITY OF AN INVESTMENT FOR ANY PARTICULAR INVESTOR. MOODY’S ISSUES ITS CREDIT RATINGS AND PUBLISHES MOODY’S PUBLICATIONS WITH THE EXPECTATION AND UNDERSTANDING THAT EACH INVESTOR WILL, WITH DUE CARE, MAKE ITS OWN STUDY AND EVALUATION OF EACH SECURITY THAT IS UNDER CONSIDERATION FOR PURCHASE, HOLDING, OR SALE.
MOODY’S CREDIT RATINGS AND MOODY’S PUBLICATIONS ARE NOT INTENDED FOR USE BY RETAIL INVESTORS AND IT WOULD BE RECKLESS AND INAPPROPRIATE FOR RETAIL INVESTORS TO USE MOODY’S CREDIT RATINGS OR MOODY’S PUBLICATIONS WHEN MAKING AN INVESTMENT DECISION. IF IN DOUBT YOU SHOULD CONTACT YOUR FINANCIAL OR OTHER PROFESSIONAL ADVISER.
ALL INFORMATION CONTAINED HEREIN IS PROTECTED BY LAW, INCLUDING BUT NOT LIMITED TO, COPYRIGHT LAW, AND NONE OF SUCH INFORMATION MAY BE COPIED OR OTHERWISE REPRODUCED, REPACKAGED, FURTHER TRANSMITTED, TRANSFERRED, DISSEMINATED, REDISTRIBUTED OR RESOLD, OR STORED FOR SUBSEQUENT USE FOR ANY SUCH PURPOSE, IN WHOLE OR IN PART, IN ANY FORM OR MANNER OR BY ANY MEANS WHATSOEVER, BY ANY PERSON WITHOUT MOODY’S PRIOR WRITTEN CONSENT.
All information contained herein is obtained by MOODY’S from sources believed by it to be accurate and reliable. Because of the possibility of human or mechanical error as well as other factors, however, all information contained herein is provided “AS IS” without warranty of any kind. MOODY'S adopts all necessary measures so that the information it uses in assigning a credit rating is of sufficient quality and from sources MOODY'S considers to be reliable including, when appropriate, independent third-party sources. However, MOODY’S is not an auditor and cannot in every instance independently verify or validate information received in the rating process or in preparing the Moody’s publications.
To the extent permitted by law, MOODY’S and its directors, officers, employees, agents, representatives, licensors and suppliers disclaim liability to any person or entity for any indirect, special, consequential, or incidental losses or damages whatsoever arising from or in connection with the information contained herein or the use of or inability to use any such information, even if MOODY’S or any of its directors, officers, employees, agents, representatives, licensors or suppliers is advised in advance of the possibility of such losses or damages, including but not limited to: (a) any loss of present or prospective profits or (b) any loss or damage arising where the relevant financial instrument is not the subject of a particular credit rating assigned by MOODY’S.
To the extent permitted by law, MOODY’S and its directors, officers, employees, agents, representatives, licensors and suppliers disclaim liability for any direct or compensatory losses or damages caused to any person or entity, including but not limited to by any negligence (but excluding fraud, willful misconduct or any other type of liability that, for the avoidance of doubt, by law cannot be excluded) on the part of, or any contingency within or beyond the control of, MOODY’S or any of its directors, officers, employees, agents, representatives, licensors or suppliers, arising from or in connection with the information contained herein or the use of or inability to use any such information.
NO WARRANTY, EXPRESS OR IMPLIED, AS TO THE ACCURACY, TIMELINESS, COMPLETENESS, MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE OF ANY SUCH RATING OR OTHER OPINION OR INFORMATION IS GIVEN OR MADE BY MOODY’S IN ANY FORM OR MANNER WHATSOEVER.
Moody’s Investors Service, Inc., a wholly-owned credit rating agency subsidiary of Moody’s Corporation (“MCO”), hereby discloses that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by Moody’s Investors Service, Inc. have, prior to assignment of any rating, agreed to pay to Moody’s Investors Service, Inc. for appraisal and rating services rendered by it fees ranging from $1,500 to approximately $2,500,000. MCO and MIS also maintain policies and procedures to address the independence of MIS’s ratings and rating processes. Information regarding certain affiliations that may exist between directors of MCO and rated entities, and between entities who hold ratings from MIS and have also publicly reported to the SEC an ownership interest in MCO of more than 5%, is posted annually at www.moodys.com
under the heading “Investor Relations — Corporate Governance — Director and Shareholder Affiliation Policy.”
Additional terms for Australia only: Any publication into Australia of this document is pursuant to the Australian Financial Services License of MOODY’S affiliate, Moody’s Investors Service Pty Limited ABN 61 003 399 657AFSL 336969 and/or Moody’s Analytics Australia Pty Ltd ABN 94 105 136 972 AFSL 383569 (as applicable). This document is intended to be provided only to “wholesale clients” within the meaning of section 761G of the Corporations Act 2001. By continuing to access this document from within Australia, you represent to MOODY’S that you are, or are accessing the document as a representative of, a “wholesale client” and that neither you nor the entity you represent will directly or indirectly disseminate this document or its contents to “retail clients” within the meaning of section 761G of the Corporations Act 2001. MOODY’S credit rating is an opinion as to the creditworthiness of a debt obligation of the issuer, not on the equity securities of the issuer or any form of security that is available to retail investors. It would be reckless and inappropriate for retail investors to use MOODY’S credit ratings or publications when making an investment decision. If in doubt you should contact your financial or other professional adviser.
Additional terms for Japan only: Moody's Japan K.K. (“MJKK”) is a wholly-owned credit rating agency subsidiary of Moody's Group Japan G.K., which is wholly-owned by Moody’s Overseas Holdings Inc., a wholly-owned subsidiary of MCO. Moody’s SF Japan K.K. (“MSFJ”) is a wholly-owned credit rating agency subsidiary of MJKK. MSFJ is not a Nationally Recognized Statistical Rating Organization (“NRSRO”). Therefore, credit ratings assigned by MSFJ are Non-NRSRO Credit Ratings. Non-NRSRO Credit Ratings are assigned by an entity that is not a NRSRO and, consequently, the rated obligation will not qualify for certain types of treatment under U.S. laws. MJKK and MSFJ are credit rating agencies registered with the Japan Financial Services Agency and their registration numbers are FSA Commissioner (Ratings) No. 2 and 3 respectively.
MJKK or MSFJ (as applicable) hereby disclose that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by MJKK or MSFJ (as applicable) have, prior to assignment of any rating, agreed to pay to MJKK or MSFJ (as applicable) for appraisal and rating services rendered by it fees ranging from JPY200,000 to approximately JPY350,000,000.
MJKK and MSFJ also maintain policies and procedures to address Japanese regulatory requirements.