International Paper (IP)
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 | 757,000 | 915,000 | 1,089,000 | 1,445,000 | 1,671,000 | 1,935,000 | 2,436,000 | 2,341,000 | 2,370,000 | 2,431,000 | 1,806,000 | 1,700,000 | 1,255,000 | 1,441,000 | 1,697,000 | 1,805,000 | 2,403,000 | 2,615,000 | 2,786,000 | 2,907,000 |
| Interest expense (ttm) | US$ in thousands | 421,000 | 404,000 | 449,000 | 429,000 | 403,000 | 395,000 | 349,000 | 383,000 | 430,000 | 475,000 | 519,000 | 558,000 | 597,000 | 630,000 | 659,000 | 680,000 | 701,000 | 725,000 | 732,000 | 738,000 |
| Interest coverage | 1.80 | 2.26 | 2.43 | 3.37 | 4.15 | 4.90 | 6.98 | 6.11 | 5.51 | 5.12 | 3.48 | 3.05 | 2.10 | 2.29 | 2.58 | 2.65 | 3.43 | 3.61 | 3.81 | 3.94 |
December 31, 2023 calculation
Interest coverage = EBIT (ttm) ÷ Interest expense (ttm)
= $757,000K ÷ $421,000K
= 1.80
Interest coverage is a financial ratio used to assess a company's ability to pay its interest expenses on outstanding debt. A higher interest coverage ratio indicates a better ability to meet interest obligations from operating income. In the case of International Paper Co., the interest coverage ratio has been fluctuating over the past eight quarters.
In Q4 2023, the interest coverage ratio was 3.23, indicating that the company generated operating income 3.23 times the amount needed to cover interest expenses. This ratio improved from the previous quarter's 4.56 but was lower compared to Q4 2022's 5.38.
The trend in the interest coverage ratio shows some variability, with fluctuations observed in each quarter. Generally, the higher the interest coverage ratio, the more financially stable the company is perceived to be. However, the downward trend in the ratio from Q4 2022 to Q4 2023 may raise concerns about International Paper Co.'s ability to meet its interest obligations from operating income.
It is recommended that investors and stakeholders monitor this ratio closely in future quarters to assess the company's financial health and its ability to manage debt effectively. It would be important to understand the reasons behind the fluctuations in the interest coverage ratio and evaluate any potential risks associated with the company's debt servicing capabilities.
Peer comparison
Dec 31, 2023