Lithia Motors Inc (LAD)

Interest coverage

		Dec 31, 2024	Sep 30, 2024	Jun 30, 2024	Mar 31, 2024	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
Earnings before interest and tax (EBIT) (ttm)	US$ in thousands	1,575,500	1,531,700	1,572,800	1,655,000	1,692,600	1,720,500	1,770,100	1,813,400	1,941,100	2,039,000	2,003,600	1,930,800	1,662,400	1,394,700	1,154,800	838,200	692,800	584,900	492,100	479,300
Interest expense (ttm)	US$ in thousands	263,200	255,700	249,700	232,400	207,800	162,700	153,800	144,300	135,400	148,900	127,300	121,000	114,400	107,300	95,900	84,600	78,100	68,300	66,500	64,700
Interest coverage		5.99	5.99	6.30	7.12	8.15	10.57	11.51	12.57	14.34	13.69	15.74	15.96	14.53	13.00	12.04	9.91	8.87	8.56	7.40	7.41

December 31, 2024 calculation

Interest coverage = EBIT (ttm) ÷ Interest expense (ttm)
= $1,575,500K ÷ $263,200K
= 5.99

Lithia Motors Inc's interest coverage ratio has shown a generally positive trend over the period from March 31, 2020, to December 31, 2024. This ratio measures the company's ability to cover its interest expenses with its earnings before interest and taxes (EBIT).

Starting at 7.41 in March 2020, the interest coverage ratio increased steadily to reach 15.96 in March 2022, indicating that the company's operating income was able to cover its interest expenses nearly 16 times over. The peak was reached in June 2022, at 15.74.

However, the ratio started declining from that point onwards. Despite the fluctuations, the interest coverage ratio remained above 5, a generally acceptable level, until December 31, 2024, where it settled at 5.99. This ratio suggests that the company's earnings were sufficient to cover its interest payments around 6 times.

Overall, the interest coverage ratio of Lithia Motors Inc indicates a healthy ability to meet its interest obligations with operating income, although there was a slight decline towards the end of the period. Management should continue monitoring this ratio to ensure the company remains financially stable and can meet its debt obligations comfortably in the future.