LKQ Corporation (LKQ)
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 | 1,220,000 | 1,425,000 | 1,442,000 | 1,470,560 | 995,807 |
| Interest expense | US$ in thousands | 262,000 | 214,000 | 78,000 | 72,078 | 103,784 |
| Interest coverage | 4.66 | 6.66 | 18.49 | 20.40 | 9.59 |
December 31, 2024 calculation
Interest coverage = EBIT ÷ Interest expense
= $1,220,000K ÷ $262,000K
= 4.66
Based on the provided data, LKQ Corporation's interest coverage ratio has shown fluctuations over the years.
As of December 31, 2020, the interest coverage ratio stood at 9.59, indicating that the company generated nearly 9.59 times the operating income to cover its interest expenses.
By December 31, 2021, the interest coverage ratio significantly improved to 20.40, suggesting a more robust ability to service its interest obligations.
The ratio slightly decreased to 18.49 by December 31, 2022, but still remained at a relatively healthy level.
However, the interest coverage ratio dropped notably to 6.66 by December 31, 2023. This decrease may raise concerns about the company's ability to meet its interest payments from operating income.
Furthermore, the ratio declined further to 4.66 by December 31, 2024, reflecting a potential strain on LKQ Corporation's earnings in relation to its interest expenses.
Overall, the trend in LKQ Corporation's interest coverage ratio raises some red flags, as the company's ability to cover interest payments has shown inconsistency and deterioration in recent years. Investors and creditors may need to monitor this ratio closely to assess the company's financial health and risk exposure.