NEW YORK (S&P Global Ratings) - The global sector outlook for transportation infrastructure is broadly stable, according to an S&P Global Ratings report published today, titled "Industry Top Trends 2018--Transportation Infrastructure." The outlook is supported by an improving macroeconomic environment, low interest rates, and positive inflation, but currency exchange volatility remains a risk.
While healthy financial performance continues, the transportation industry is facing a number of pressures that are reshaping the sector. Technology and mobility disruption bring both risks and opportunities to activities related to roads, car parks, airports, and ports. In the medium term, operational profitability will increasingly depend on how companies effectively face these challenges. S&P Global Ratings see transportation companies having to place some strategic bets in the next couple of years.
We expect strong cash flow generation and stable balance sheets, driven by higher earnings, higher distributions, and capital expenditure. Government downgrades and M&A activity in 2017 are the two drivers of negative rating pressure in our transportation infrastructure portfolio. On average, we do not see significant financial rating headroom at current rating levels. M&A activity is likely to be the main reason for rating actions.
