The simple answer is yes.
Oh, you won't see editors saying that much, although I do have them admit it from time to time. They point to other things or say "it's not a good fit." But formatting enters into it.
I had one author say "Sometimes I think all this hype is deliberately aimed at getting writers nervous and creating a sense you won't get published unless you hire a free-lance editor. It's getting so a poor bloke won't be able to write unless he mortgages his house to hire a staff to get his manuscript in ship-shape order because supposedly publishers aren't willing to even read a a less than perfect manuscript."
I responded, "It isn’t that they aren’t willing to read it, but the fact that they have been cut back so drastically that they don’t have people to do heavy editing. That means they are looking for manuscripts that are good books, but more so are ready to go without a great deal of work. The cleaner one is the better it competes against other ones that are coming in and are ready to go."
It’s called “survival of the fittest.”
I've pointed out in the past that we get hundreds of good books each month. Hundreds! Obviously we can't represent that many, and whether coming in direct or from a number of agents, editors are getting far more submissions than they can publish, even if they are good. Quite simply that means good is just not good enough. To make the cut a manuscript must be exceptional. It must be a unique story in a unique voice, and yes, it must be as clean and ready to go as we can possibly make it.
The checklist that I use is online at http://www.terryburns.net/Submit.htm and I automatically check for these items as I read. You see, my estimation of a writer goes up significantly if I'm reading their submission and find I'm not having to do much formatting or finding typos and extra spaces stuck in all over the place. I know an editor feels this way as well and when they are reading a clean submission that doesn't seem to require as much editing, they concentrate more on the plot and the storyline. That's what I want and why I try to make anything I send to an editor as clean as possible.
But I have a limited amount of time to do such work as well and when a project obviously needs a great deal of work, well . . .