Uber Technologies has been upgraded to investment grade by S&P Global Ratings, citing an improvement in the US ride-hailing company's profit margin and “strong commitment” to maintain conservative financial policies.
The San Francisco-based company's issuer credit rating was lifted to “BBB-", from “BB+", towing Uber from non-investment grade territory in S&P's scale, the rating agency said on Friday.
The outlook for Uber is positive, which indicates a potential for a further upgrade within the next 12-24 months if Uber's financial performance “continues to improve in line with our forecast as it navigates an evolving regulatory and technology landscape”, New York-based S&P said.
S&P also expects that Uber's “solid business execution will likely support continued credit metric improvements and free cash flow growth”.
“We expect Uber to support earnings expansion with economies of scale in its core mobility and delivery businesses and newer business strategies such as grocery and higher-margin advertising,” it added.
Uber's rating upgrade comes at a time when its bottom line is improving. Investment grade makes it easier for a company to raise funding should it wish to grow its business and expand its operations, as well as gain access to lower borrowing costs.
Part of its expansion strategy is to tap into high-growth markets, especially in the Middle East, where it owns the region's leading industry player, Dubai-based Careem.
The company plans to continue growing its operations in the wider Middle East, which is one of Uber's “leading regions” driving its long-term business strategy, Uber chief executive Dara Khosrowshahi told The National in June.
Earlier this month, the company reported revenue of almost $10.7 billion in the second quarter, about 16 per cent up on an annual basis, exceeding analysts’ expectation of $10.5 billion. Its earnings per share stood at 47 cents above the expected 31 cents.
It reported a net profit of more than $1 billion in the second quarter, up from a net loss of $654 million in the March quarter. However, it was up 158 per cent on a yearly basis.
Uber, once the most valuable start-up in the world, has posted a full-year profit only twice in its 15-year history, the last of which was in last year, which was also the first time it ended in the black since going public in 2019.
“While Uber continues to build on its short record of positive adjusted Ebitda [earnings before interest, taxes, depreciation and amortisation] and FOCF [free operating cash flow], our upgrade reflects the company's consistent gross bookings growth above 20 per cent and earnings momentum,” S&P said.
The second quarter was also Uber's sixth consecutive quarter of trip growth above 20 per cent, with drivers and couriers earning a new high of $17.9 billion in the April-to-June period.
The company’s gross bookings increased 19 per cent year-on-year to about $40 billion in the second quarter. Delivery gross bookings rose 16 per cent to more than $18.1 billion and mobility bookings increased 23 per cent to over $20.5 billion.
“They are not only strong but also sustainable … we expect it to sustain Ebitda margin above 13 per cent during this period [as] it has steadily improved Ebitda margins in the mobility and delivery segments from increasing network scale, easing driver supply incentives and lowering consumer promotions,” S&P said.
For the third quarter, Uber had predicted adjusted earnings to be between $1.58 billion and $1.68 billion, up almost 78 per cent annually. The mid-range estimate of $1.63 billion slightly exceeded analysts' $1.62 billion estimate.
“Healthy year-to-date operating performance, coupled with expectations for continued growth in the third quarter, increases our expectation that Uber will achieve our 2024 forecasts broadly in line with management's outlook,” S&P said.
“We believe Uber will stay on track to achieve its three-year growth and profit forecast introduced at its investor update in February 2024.”
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Company profile: buybackbazaar.com
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The internal combustion engine is facing a watershed moment – major manufacturer Volvo is to stop producing petroleum-powered vehicles by 2021 and countries in Europe, including the UK, have vowed to ban their sale before 2040. The National takes a look at the story of one of the most successful technologies of the last 100 years and how it has impacted life in the UAE.
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- Jebel Akhdar is a two-hour drive from Muscat airport or a six-hour drive from Dubai. It’s impossible to visit by car unless you have a 4x4. Phone ahead to the hotel to arrange a transfer.
- If you’re driving, make sure your insurance covers Oman.
- By air: Budget airlines Air Arabia, Flydubai and SalamAir offer direct routes to Muscat from the UAE.
- Tourists from the Emirates (UAE nationals not included) must apply for an Omani visa online before arrival at evisa.rop.gov.om. The process typically takes several days.
- Flash floods are probable due to the terrain and a lack of drainage. Always check the weather before venturing into any canyons or other remote areas and identify a plan of escape that includes high ground, shelter and parking where your car won’t be overtaken by sudden downpours.
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UK
Innovator Founder Visa is aimed at those who can demonstrate relevant experience in business and sufficient investment funds to set up and scale up a new business in the UK. It offers permanent residence after three years.
Germany
Investing or establishing a business in Germany offers you a residence permit, which eventually leads to citizenship. The investment must meet an economic need and you have to have lived in Germany for five years to become a citizen.
Italy
The scheme is designed for foreign investors committed to making a significant contribution to the economy. Requires a minimum investment of €250,000 which can rise to €2 million.
Switzerland
Residence Programme offers residence to applicants and their families through economic contributions. The applicant must agree to pay an annual lump sum in tax.
Canada
Start-Up Visa Programme allows foreign entrepreneurs the opportunity to create a business in Canada and apply for permanent residence.
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Europe’s rearming plan
- Suspend strict budget rules to allow member countries to step up defence spending
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