Eaton Corporation PLC (ETN)
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 | 3,344,000 | 3,162,000 | 2,790,000 | 2,529,000 | 2,487,000 | 1,829,000 | 2,388,000 | 2,564,000 | 2,428,000 | 2,590,000 | 2,063,000 | 1,462,000 | 1,667,000 | 1,871,000 | 2,055,000 | 2,761,000 | 2,769,000 | 3,591,000 | 3,816,000 | 9,217,000 |
| Interest expense (ttm) | US$ in thousands | 152,000 | 169,000 | 173,000 | 162,000 | 144,000 | 132,000 | 132,000 | 138,000 | 144,000 | 148,000 | 152,000 | 153,000 | 149,000 | 129,000 | 142,000 | 154,000 | 180,000 | 230,000 | 243,000 | 261,000 |
| Interest coverage | 22.00 | 18.71 | 16.13 | 15.61 | 17.27 | 13.86 | 18.09 | 18.58 | 16.86 | 17.50 | 13.57 | 9.56 | 11.19 | 14.50 | 14.47 | 17.93 | 15.38 | 15.61 | 15.70 | 35.31 |
December 31, 2023 calculation
Interest coverage = EBIT (ttm) ÷ Interest expense (ttm)
= $3,344,000K ÷ $152,000K
= 22.00
Based on the data provided, Eaton Corporation plc's interest coverage ratio has shown a fluctuating trend over the past eight quarters. The interest coverage ratio measures the company's ability to meet its interest obligations with its earnings before interest and taxes (EBIT).
In Q4 2023, the interest coverage ratio was at its highest level of 25.73, indicating that Eaton Corporation plc generated more than enough EBIT to cover its interest expenses during that period. This suggests a strong financial position and ability to comfortably meet interest payments.
Although there was a slight decrease in Q3 2023 to 21.79, the interest coverage ratio remained relatively high, reflecting continued strong performance in generating earnings relative to interest expenses.
However, in Q1 2023 and Q2 2023, the interest coverage ratios dropped slightly to 19.72 and 19.61 respectively, raising some concerns about the company's ability to cover its interest obligations with its operating income.
Comparing the data with the previous year, there seems to have been some fluctuations with the interest coverage ratio. While there was an improvement in Q4 2022 with a ratio of 20.80 compared to the previous quarter, the ratio dipped in Q3 2022 before stabilizing around the 20 mark in the previous quarters.
Overall, Eaton Corporation plc's interest coverage ratio has shown some variability, but generally remained at levels that suggest the company is able to comfortably meet its interest payments with its operating earnings. However, management should continue to monitor the trend to ensure the company's financial health and ability to service its debt obligations.
Peer comparison
Dec 31, 2023