Varex Imaging Corporation (VREX) Downgraded by S&P as Regulatory Outlook Remains Cloudy

S&P Global Ratings has downgraded its ratings on Varex Imaging Corporation (NASDAQ:VREX) because it believes the stock is surrounded by high levels of unpredictability and weaker credit metrics.

Tariff drama has been lingering for quite some time now, and with uncertainty around policy implementation by the U.S. administration, the firm believes Varex’s profitability and sales are under serious threat.

A technician in a lab coat inspecting an X-ray imaging component.

The slashing of the rating from ‘B+’ to ‘BB-’ also considers the refinancing risk of the company stemming from near-term maturities. With short-term capital structure, external factors, including capital market conditions and geopolitical risk, push the company into a vulnerable state.

This isn’t the first time the company has exhibited such performance. The credit assessor now expects a leverage above the downside threshold of 3.5x, with a free operating cash flow (FOCF) to debt below 12% for FY2025, much in line with last year’s benchmark.

No relief from the medical segment either, as the demand remains subdued. Despite the approval of a $1.4 trillion government stimulus package, the Chinese government is taking initiatives to support local vendors, putting further pressure on Varex Imaging Corporation (NASDAQ:VREX)’s sales. However, due to the company’s competitive position and new contracts, S&P has extended a stable rating outlook.

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