Eaton Corporation PLC (ETN)
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 | 4,627,000 | 3,822,000 | 2,077,000 | 1,501,000 | 863,000 |
| Interest expense | US$ in thousands | 130,000 | 151,000 | 144,000 | 144,000 | 149,000 |
| Interest coverage | 35.59 | 25.31 | 14.42 | 10.42 | 5.79 |
December 31, 2024 calculation
Interest coverage = EBIT ÷ Interest expense
= $4,627,000K ÷ $130,000K
= 35.59
Interest coverage ratio measures a company's ability to pay its interest expenses with its earnings before interest and taxes (EBIT). A higher interest coverage ratio indicates a stronger ability of the company to cover its interest obligations.
For Eaton Corporation PLC, the interest coverage ratio has shown a consistent improvement over the years. In December 31, 2020, the ratio was 5.79, indicating the company's earnings were able to cover its interest payments nearly 6 times. This ratio improved to 10.42 in December 31, 2021, further increasing to 14.42 in December 31, 2022, and then to 25.31 in December 31, 2023, demonstrating a significant enhancement in the company's ability to meet its interest expenses.
The most recent ratio of 35.59 as of December 31, 2024, signifies a substantial increase in the company's ability to cover its interest payments with its operating earnings. This trend indicates that Eaton Corporation PLC has been effectively managing its debt obligations and increasing its profitability, which is a positive signal for investors and creditors regarding the company's financial health and stability.
Peer comparison
Dec 31, 2024