Forward Air Corporation (FWRD)

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	-1,060,620	88,210	247,591	159,301	73,921
Interest expense	US$ in thousands	189,215	31,571	5,138	4,338	4,561
Interest coverage		-5.61	2.79	48.19	36.72	16.21

December 31, 2024 calculation

Interest coverage = EBIT ÷ Interest expense
= $-1,060,620K ÷ $189,215K
= -5.61

Interest coverage is a crucial financial ratio that measures a company's ability to meet its interest obligations from its operating income. Looking at Forward Air Corporation's interest coverage over the past five years, we observe a positive trend from 2020 to 2022, indicating the company's increasing ability to cover its interest expenses. The interest coverage ratio improved significantly from 16.21 in 2020 to 48.19 in 2022, reflecting a strong ability to service its debt.

However, there was a sharp decline in interest coverage in 2023 as it dropped to 2.79, which may raise concerns about the company's ability to cover its interest expenses adequately from its earnings. Furthermore, the interest coverage ratio turned negative in 2024, standing at -5.61, indicating that Forward Air Corporation may have faced challenges meeting its interest obligations from its operating income during that period.

Overall, the trend in Forward Air Corporation's interest coverage ratio shows improvements up to 2022, but the significant decline in 2023 and the negative ratio in 2024 suggest potential financial strain and the need for closer monitoring of the company's debt servicing capabilities. This analysis highlights the importance of assessing a company's ability to meet its interest payments to gauge its financial health and stability.