Is there a better credit risk than Apple?

S&P says yes, and assigns a AA+ rating to the company.

By Forbes Digital Apr 24, 2013 2:53PM

Apple (AAPL) announced it will tap the debt markets as part of its plan to return at least $100 billion to shareholders through dividends and stock buybacks by the end of 2015, which means the company will need a credit rating.

Standard & Poor's obliged, assigning a AA+ corporate credit rating to the company with a stable outlook, implying a commensurate rating for any senior unsecured debt issued in connection with the capital return plan.

Credit analyst Martha Toll-Reed said the rating "reflects the company's 'minimal' financial risk profile and 'strong' business risk profile." Despite the highly-competitive circles in which Apple operates, S&P believes the company's management and innovation capabilities will sustain its competitive advantage.

Coupled with excellent liquidity -- throwing off billions in cash every quarter doesn't hurt -- the company has a "substantial cushion" for volatility in revenue and earnings growth, S&P says.

As for the possibility of a AAA rating, competition is just too fierce in Apple's arena, so its chances are "constrained" by a rapidly-evolving market. While a downgrade driven by declining operating performance that impacts the company's net cash position is unlikely, the bar is extremely high for an upgrade.

Moody's came down on the same side of things as S&P, assigning an equivalent Aa1 rating,  due to the "inherent long-run risks for any company with high exposure to shifting consumer preferences in the rapidly evolving technology and wireless communications sectors," according to analyst Gerald Granovsky.

The competitive environment in the smartphone business -- just look at the highs and lows of companies like BlackBerry (BBRY) and Nokia (NOK) -- keeps Apple out of a small group of AAA-rated U.S. corporates that got even smaller after the financial crisis, down to just Exxon Mobil (XOM), Johnson & Johnson (JNJ), Automatic Data (ADP) and Microsoft (MSFT). Worth noting: Apple now carries the same credit rating as Uncle Sam, after S&P docked the U.S. government a notch in August 2011. (Microsoft owns and publishes Top Stocks, an MSN Money site.)

Shares of Apple raced out to near 5% gains after-hours Tuesday, climbing to $425.45, but pulled back Wednesday to $410 in afternoon trading. 

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