Cummins Inc (CMI)
Interest coverage
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | ||
|---|---|---|---|---|---|---|
| Earnings before interest and tax (EBIT) | US$ in thousands | 3,750,000 | 1,761,000 | 2,929,000 | 2,706,000 | 2,269,000 |
| Interest expense | US$ in thousands | 370,000 | 375,000 | 199,000 | 111,000 | 100,000 |
| Interest coverage | 10.14 | 4.70 | 14.72 | 24.38 | 22.69 |
December 31, 2024 calculation
Interest coverage = EBIT ÷ Interest expense
= $3,750,000K ÷ $370,000K
= 10.14
Cummins Inc's interest coverage ratio has shown a fluctuating trend over the past five years. Beginning at 22.69 in December 2020, the ratio improved to 24.38 by December 2021, indicating the company's ability to cover its interest expenses comfortably. However, there was a significant decline in the interest coverage ratio to 14.72 by December 2022, suggesting a potential increase in the company's financial risk.
Subsequently, the ratio dropped further to 4.70 by December 2023, signaling a concerning decline in Cummins Inc's ability to service its interest obligations from its operating income. The most recent data point as of December 31, 2024, shows a slight improvement in the interest coverage ratio to 10.14, although it remains below the levels seen in the earlier years.
Overall, Cummins Inc's interest coverage has exhibited notable variability, with periods of strong coverage followed by times of relative weakness. It is essential for the company to closely monitor its interest coverage ratio to ensure it maintains a healthy financial position and can meet its debt obligations effectively.
Peer comparison
Dec 31, 2024