Cummins Inc (CMI)
Interest coverage
| 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 | Dec 31, 2019 | Sep 30, 2019 | Jun 30, 2019 | Mar 31, 2019 | ||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Earnings before interest and tax (EBIT) (ttm) | US$ in thousands | 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 | 2,700,000 | 3,077,000 | 3,181,000 | 3,055,000 |
| Interest expense (ttm) | US$ in thousands | 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 | 109,000 | 119,000 | 123,000 | 122,000 |
| Interest coverage | 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 | 24.77 | 25.86 | 25.86 | 25.04 |
December 31, 2023 calculation
Interest coverage = EBIT (ttm) ÷ Interest expense (ttm)
= $1,761,000K ÷ $375,000K
= 4.70
Interest coverage is a key financial ratio that measures a company's ability to meet its interest payment obligations with its operating income. By analyzing the interest coverage ratios of Cummins Inc. over the past eight quarters, we observe a consistently high level of coverage, indicating the company's strong capacity to service its debt obligations.
In Q4 2022, Cummins Inc. had an interest coverage ratio of 20.23, which declined slightly in subsequent quarters but remained above 13 in all periods. This consistent performance reflects the company's ability to generate sufficient earnings to cover its interest expenses.
The highest interest coverage ratio of 36.53 was recorded in Q2 2022, suggesting a robust cushion against the company's interest payments. Even in the most recent quarter (Q4 2023), with an interest coverage ratio of 13.55, Cummins Inc. continued to demonstrate a healthy ability to meet its interest obligations.
Overall, the trend of consistently high interest coverage ratios indicates that Cummins Inc. has a solid financial position and strong profitability, which bodes well for its ability to manage debt and maintain financial stability in the long term.
Peer comparison
Dec 31, 2023