Carnival Corporation (CCL)

Interest coverage

		Feb 29, 2024	Nov 30, 2023	Aug 31, 2023	May 31, 2023	Feb 28, 2023	Nov 30, 2022	Aug 31, 2022	May 31, 2022	Feb 28, 2022	Nov 30, 2021	Aug 31, 2021	May 31, 2021	Feb 28, 2021	Nov 30, 2020	Aug 31, 2020	May 31, 2020	Feb 29, 2020	Nov 30, 2019	Aug 31, 2019	May 31, 2019
Earnings before interest and tax (EBIT) (ttm)	US$ in thousands	2,408,000	2,004,000	423,000	-1,497,000	-3,098,000	-4,471,000	-5,594,000	-7,698,000	-7,860,000	-7,921,000	-7,534,000	-7,643,000	-10,223,000	-9,357,000	-6,981,000	-2,552,000	2,164,000	3,268,000	3,335,000	3,249,000
Interest expense (ttm)	US$ in thousands	1,997,000	2,065,000	2,047,000	1,951,000	1,779,000	1,608,000	1,508,000	1,504,000	1,571,000	1,601,000	1,601,000	1,493,000	1,238,000	895,000	596,000	338,000	210,000	206,000	204,000	201,000
Interest coverage		1.21	0.97	0.21	-0.77	-1.74	-2.78	-3.71	-5.12	-5.00	-4.95	-4.71	-5.12	-8.26	-10.45	-11.71	-7.55	10.30	15.86	16.35	16.16

February 29, 2024 calculation

Interest coverage = EBIT (ttm) ÷ Interest expense (ttm)
= $2,408,000K ÷ $1,997,000K
= 1.21

The interest coverage ratio for Carnival Corporation has shown significant fluctuations over the past few years. The trend indicates a declining ability to cover interest expenses with operating income, with ratios as low as -11.71 and -10.45 in the most recent periods. This suggests a potentially higher financial risk for the company as it may struggle to meet its interest obligations from its operating profits.

The negative ratios in some periods indicate that Carnival's operating earnings were insufficient to cover its interest expenses, highlighting a potential strain on its financial health. The company's deteriorating interest coverage ratio trend raises concerns about its ability to service debt and may indicate financial distress.

The substantial decrease in interest coverage from positive levels (e.g., 16.35 in May 2019) to negative levels in recent periods suggests a significant decline in Carnival Corporation's ability to generate enough operating income to cover its interest payments. This may signal increased leverage or declining profitability, which could pose risks to the company's financial stability and creditworthiness.

Overall, Carnival Corporation's interest coverage ratio indicates a concerning trend of weakening financial health and potential difficulties in meeting its interest obligations from operating earnings. Investors and creditors should closely monitor the company's financial performance and debt levels to assess its ability to manage its interest expenses effectively.