Cummins Inc (CMI)
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 | 3,750,000 | 1,806,000 | 1,706,000 | 1,658,000 | 1,761,000 | 3,775,000 | 3,451,000 | 3,351,000 | 2,929,000 | 2,622,000 | 2,662,000 | 2,500,000 | 2,706,000 | 2,840,000 | 2,844,000 | 2,445,000 | 2,269,000 | 1,994,000 | 2,023,000 | 2,535,000 |
| Interest expense (ttm) | US$ in thousands | 370,000 | 102,000 | 387,000 | 377,000 | 375,000 | 370,000 | 334,000 | 269,000 | 199,000 | 138,000 | 105,000 | 100,000 | 111,000 | 114,000 | 111,000 | 105,000 | 100,000 | 93,000 | 94,000 | 100,000 |
| Interest coverage | 10.14 | 17.71 | 4.41 | 4.40 | 4.70 | 10.20 | 10.33 | 12.46 | 14.72 | 19.00 | 25.35 | 25.00 | 24.38 | 24.91 | 25.62 | 23.29 | 22.69 | 21.44 | 21.52 | 25.35 |
December 31, 2024 calculation
Interest coverage = EBIT (ttm) ÷ Interest expense (ttm)
= $3,750,000K ÷ $370,000K
= 10.14
Cummins Inc's interest coverage ratio, which measures the company's ability to meet its interest obligations, has been on a declining trend from March 2020 to December 2024. The interest coverage ratio started at a healthy level of 25.35 in March 2020, indicating the company's strong ability to cover its interest expenses by its operating income. However, the ratio gradually decreased over the years, reaching its lowest point of 4.40 in March 2024.
The decreasing trend in the interest coverage ratio suggests that Cummins Inc's operating income may not be sufficient to cover its interest expenses, which could raise concerns about the company's financial health and solvency. A low interest coverage ratio can indicate higher financial risk and potential difficulties in meeting debt obligations.
It is important for investors and stakeholders to closely monitor Cummins Inc's interest coverage ratio going forward to assess the company's ability to manage its debt and interest payments effectively. Additionally, management may need to consider strategies to improve the company's profitability and cash flow generation in order to strengthen its ability to cover interest expenses in the future.
Peer comparison
Dec 31, 2024