S&P upgrades EssilorLuxottica to ’A+’ on strength of medtech pivot

S&P Global Ratings has upgraded EssilorLuxottica SA's (EPA:ESLX) long-term issuer credit rating to ‘A+’ from ‘A’, citing the company's successful pivot from a traditional consumer goods business into an integrated medtech leader. The rating agency affirmed the group's 'A-1' short-term rating while assigning a stable outlook, reflecting expectations that core vision care demand will continue to shield the group from broader macroeconomic headwinds.

The upgrade highlights how EssilorLuxottica’s medtech strategy has effectively decoupled its growth profile from discretionary spending cycles. S&P projects revenue growth of 4.6% in 2026 before accelerating to approximately 7.5% annually across 2027 and 2028, underpinned by high-margin prescription products like its Stellest myopia-control lenses and an expanding footprint in ocular diagnostics.

While smart glasses and wearable technology have introduced headlines surrounding privacy concerns and potential tech competition, S&P views these risks as secondary to the investment thesis. The wearables category currently accounts for roughly 6% of year-to-date sales, functioning as an incremental growth lever rather than a core vulnerability for the group's broader operations.

The rating agency emphasized EssilorLuxottica's robust cash flow generation as a foundational credit strength supporting its elevated rating. Annual free operating cash flow is expected to range between €4.3 billion and €4.8 billion through 2028, providing ample flexibility to fund steady shareholder returns, selective M&A, and targeted share buybacks while maintaining adjusted leverage comfortably within the 1.5x to 2.0x target range.

Governance dynamics also appear well-contained despite recent market scrutiny surrounding single-shareholder conduct within the controlling Del Vecchio family holding, Delfin. S&P noted that operational decision-making remains structurally insulated from family interests, with executive leadership firmly backed by the board of directors as the company executes its broader healthcare transformation.