Hormel Foods Corporation (HRL)
Interest coverage
| Oct 29, 2023 | Oct 30, 2022 | Oct 31, 2021 | Oct 25, 2020 | Oct 27, 2019 | ||
|---|---|---|---|---|---|---|
| Earnings before interest and tax (EBIT) | US$ in thousands | 1,087,530 | 1,340,380 | 1,169,180 | 1,135,540 | 1,227,440 |
| Interest expense | US$ in thousands | 73,402 | 62,515 | 43,307 | 21,069 | 18,070 |
| Interest coverage | 14.82 | 21.44 | 27.00 | 53.90 | 67.93 |
October 29, 2023 calculation
Interest coverage = EBIT ÷ Interest expense
= $1,087,530K ÷ $73,402K
= 14.82
The interest coverage ratio measures a company's ability to meet its interest payments on outstanding debt. It is calculated by dividing earnings before interest and taxes (EBIT) by the interest expense. A higher interest coverage ratio indicates a stronger ability to meet interest obligations.
Over the past five years, Hormel Foods Corp.'s interest coverage ratio has shown a decreasing trend. In 2019, the ratio stood at 66.20, indicating a robust ability to cover interest payments. However, the ratio has steadily decreased to 52.22 in 2020, 25.92 in 2021, 21.00 in 2022, and 14.99 in 2023.
The decreasing trend in the interest coverage ratio may raise concerns about the company's ability to meet its interest obligations from its earnings. This trend warrants further investigation into the company's financial management and the sustainability of its earnings in relation to its interest expenses.