Renault shares rise after S&P upgrades credit rating to BBB-

Investing.com -- Renault SA (EPA:RENA) shares rose on Friday after S&P Global Ratings upgraded the French carmaker’s credit rating, citing resilient free cash flow prospects despite difficult market conditions in Europe.

S&P Global Ratings raised Renault’s long- and short-term issuer credit ratings to “BBB-/A-3” and lifted the long-term issue credit rating on its debt to “BBB-.” 

The outlook is stable, reflecting the agency’s view that Renault can withstand weak market conditions without a material deterioration in credit metrics or liquidity, according to a statement released in London on Dec. 18.

The ratings agency said Renault’s post-restructuring business model is expected to support free operating cash flow generation over the next couple of years, with free operating cash flow to sales forecast at about 2%. 

S&P said Renault is likely to maintain a prudent financial policy that balances shareholder returns with protection of its net cash position.

S&P expects Renault to sustain adjusted EBITDA margins of about 6% and free operating cash flow to sales of about 2% even in adverse market conditions. 

The agency noted that these levels are lower than those recorded in 2023 and 2024, when free operating cash flow to sales was about 4%, but are consistent with a “BBB-” rating.

Renault has refreshed its product pipeline and is expanding its international presence, which S&P said should support revenue and volume growth in 2026 and 2027 despite a more competitive environment. The company plans to launch about 10 new models globally by 2027 and has introduced vehicles including the Renault 5 E-Tech, Scenic E-Tech, Twingo E-Tech, Dacia Bigster and the new Clio 6, while updating the Austral and Espace models.

The agency highlighted Renault’s multienergy strategy, combining internal combustion engines, hybrid vehicles and electric vehicles, as a factor supporting volume stability amid uneven adoption of EVs across markets.

In the first nine months of 2025, battery electric vehicles accounted for about 12.7% of Renault’s total sales, while hybrids represented 30.4%, according to S&P. 

Renault ranks second in Europe’s hybrid market behind Toyota, which S&P said helps reduce fleet emissions while preserving margins.

S&P forecast that capital expenditure and research and development spending will remain below 8% of sales, supported by partnerships that allow Renault to share development and manufacturing costs. 

The agency said working capital is not expected to provide the same cash flow support in 2026 and 2027 as in previous years.

Renault lowered its operating margin guidance for 2025 to about 6.5% from 7.6% in 2024, reflecting pricing pressure, regulatory-driven costs and intensifying competition, particularly from Asian manufacturers. 

S&P expects adjusted EBITDA margins to stabilize at about 6% in 2026 and 2027 and assumes no dividend income from Nissan during that period.

The stable outlook also reflects expectations that Renault will maintain strong liquidity and positive discretionary cash flow, even as dividend payments rise to €800 million in 2026 and €850 million in 2027 from €693 million in 2025. 

S&P said Renault’s remaining stake in Nissan, valued at about €2.7 billion, provides additional financial flexibility.

S&P said the rating could be lowered if Renault’s competitive position in Europe weakens materially or if free operating cash flow to sales falls well below 2%. 

An upgrade would depend on sustained free operating cash flow above 3%, higher EBITDA margins and continued protection of the company’s net cash position.