American Water Works (AWK)
Interest coverage
| Dec 31, 2024 | Sep 30, 2024 | Jun 30, 2024 | Mar 31, 2024 | Dec 31, 2023 | Sep 30, 2023 | Jun 30, 2023 | Mar 31, 2023 | Dec 31, 2022 | Sep 30, 2022 | Jun 30, 2022 | Mar 31, 2022 | Dec 31, 2021 | Sep 30, 2021 | Jun 30, 2021 | Mar 31, 2021 | Dec 31, 2020 | Sep 30, 2020 | Jun 30, 2020 | Mar 31, 2020 | ||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Earnings before interest and tax (EBIT) (ttm) | US$ in thousands | 1,718,000 | 1,617,000 | 1,552,000 | 1,535,000 | 1,504,000 | 1,466,000 | 1,427,000 | 1,322,000 | 1,273,000 | 1,232,000 | 1,210,000 | 1,213,000 | 1,196,000 | 1,239,000 | 1,255,000 | 1,238,000 | 1,248,000 | 1,209,000 | 1,182,000 | 1,171,000 |
| Interest expense (ttm) | US$ in thousands | 523,000 | 505,000 | 490,000 | 469,000 | 460,000 | 458,000 | 452,000 | 448,000 | 433,000 | 420,000 | 410,000 | 405,000 | 403,000 | 399,000 | 397,000 | 397,000 | 395,000 | 394,000 | 392,000 | 385,000 |
| Interest coverage | 3.28 | 3.20 | 3.17 | 3.27 | 3.27 | 3.20 | 3.16 | 2.95 | 2.94 | 2.93 | 2.95 | 3.00 | 2.97 | 3.11 | 3.16 | 3.12 | 3.16 | 3.07 | 3.02 | 3.04 |
December 31, 2024 calculation
Interest coverage = EBIT (ttm) ÷ Interest expense (ttm)
= $1,718,000K ÷ $523,000K
= 3.28
The interest coverage ratio measures a company's ability to meet its interest payment obligations with its operating income. For American Water Works, the trend in the interest coverage ratio over the past few years has been relatively stable, ranging between 2.93 and 3.28.
The interest coverage ratio for American Water Works has been consistently above 1, indicating that the company generates enough operating income to comfortably cover its interest expenses. A ratio above 1 suggests that the company is at lower risk of defaulting on its debt obligations.
Although the ratio has fluctuated slightly over the reporting periods, it has generally remained within a narrow range. This stability indicates that American Water Works has maintained a consistent ability to cover its interest payments with its operating earnings.
However, the downward trend in the most recent quarters, with the interest coverage ratio declining to 2.95 in March 2024 from a peak of 3.28 in December 2024, may warrant further monitoring. A decreasing interest coverage ratio could indicate a potential strain on the company's ability to meet its interest obligations in the future.
In conclusion, while American Water Works has historically maintained a healthy interest coverage ratio above 1, investors and analysts should continue to monitor any further fluctuations in the ratio to assess the company's ongoing ability to service its debt.
Peer comparison
Dec 31, 2024