Lamb Weston Holdings Inc (LW)
Interest coverage
| May 31, 2025 | Feb 28, 2025 | Nov 30, 2024 | Aug 31, 2024 | May 31, 2024 | May 26, 2024 | Feb 29, 2024 | Feb 25, 2024 | Nov 30, 2023 | Nov 26, 2023 | Aug 31, 2023 | Aug 27, 2023 | May 31, 2023 | May 28, 2023 | Feb 28, 2023 | Feb 26, 2023 | Nov 30, 2022 | Nov 27, 2022 | Aug 31, 2022 | Aug 28, 2022 | ||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Earnings before interest and tax (EBIT) (ttm) | US$ in thousands | 666,300 | 693,000 | 655,600 | 861,000 | 872,800 | 965,900 | 1,059,000 | 1,158,400 | 1,257,800 | 1,139,200 | 1,020,600 | 963,600 | 906,600 | 991,400 | 1,076,200 | 966,900 | 857,600 | 721,800 | 586,000 | 562,800 |
| Interest expense (ttm) | US$ in thousands | 180,000 | 176,100 | 169,100 | 161,500 | 152,000 | 140,800 | 129,600 | 124,600 | 119,600 | 123,300 | 127,000 | 122,100 | 117,200 | 109,000 | 100,800 | 101,000 | 101,200 | 101,500 | 101,800 | 101,600 |
| Interest coverage | 3.70 | 3.94 | 3.88 | 5.33 | 5.74 | 6.86 | 8.17 | 9.30 | 10.52 | 9.24 | 8.04 | 7.89 | 7.74 | 9.10 | 10.68 | 9.57 | 8.47 | 7.11 | 5.76 | 5.54 |
May 31, 2025 calculation
Interest coverage = EBIT (ttm) ÷ Interest expense (ttm)
= $666,300K ÷ $180,000K
= 3.70
Lamb Weston Holdings Inc.'s interest coverage ratios over the provided period demonstrate a generally stable but gradually declining trend. The ratio, which measures the company's ability to meet its interest obligations from its earnings before interest and taxes (EBIT), fluctuated from a high of approximately 10.68 in late February 2023 to a low of approximately 3.70 projected for May 2025.
From late August 2022 through early November 2023, the interest coverage ratio experienced an upward trajectory, reaching peaks near 10.68, indicating periods of strong earnings relative to interest expenses and suggesting comfortable coverage of interest obligations during this period. Subsequently, starting around the end of November 2023, a downward trend becomes apparent, with the ratio declining steadily. By the end of the forecast period in May 2025, the ratio approaches approximately 3.70, signaling a notable reduction in the company's earning capacity to cover interest expenses.
A ratio above 3.0 typically signifies adequate coverage, though the declining trend warrants monitoring as it approaches lower thresholds of comfort. The narrowing margins could reflect either increased interest expenses, decreased earnings, or a combination of both. While the ratio remains above critical levels throughout the period, the consistent downward movement indicates a gradual erosion in the company's interest coverage strength over time.
In summary, Lamb Weston Holdings Inc. has exhibited a historically strong capacity to service interest obligations in the recent past, but the gradual decline in interest coverage ratios suggests caution, as it may point toward increased financial leverage or reduced earnings, potentially impacting liquidity and financial stability if the trend persists.
Peer comparison
May 31, 2025