Pentair PLC (PNR)
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 | 739,200 | 683,800 | 650,800 | 633,100 | 595,300 | 634,400 | 654,600 | 625,600 | 636,900 | 607,700 | 568,500 | 517,800 | 461,400 | 462,200 | 442,900 | 465,600 | 432,500 | 423,200 | 422,800 | 411,600 |
| Interest expense (ttm) | US$ in thousands | 118,300 | 91,700 | 65,500 | 38,800 | 9,000 | 10,000 | 11,300 | 10,000 | 12,500 | 15,400 | 18,200 | 22,100 | 23,900 | 26,500 | 28,000 | 29,700 | 30,100 | 28,300 | 25,700 | 26,400 |
| Interest coverage | 6.25 | 7.46 | 9.94 | 16.32 | 66.14 | 63.44 | 57.93 | 62.56 | 50.95 | 39.46 | 31.24 | 23.43 | 19.31 | 17.44 | 15.82 | 15.68 | 14.37 | 14.95 | 16.45 | 15.59 |
December 31, 2023 calculation
Interest coverage = EBIT (ttm) ÷ Interest expense (ttm)
= $739,200K ÷ $118,300K
= 6.25
Interest coverage ratio measures a company's ability to meet its interest obligations with its operating income. A higher ratio indicates a greater ability to meet interest expenses.
Analyzing Pentair plc's interest coverage over the past eight quarters, it is evident that there has been a consistent downward trend. In Q1 2022, the interest coverage ratio was at its peak at 47.76, reflecting a robust ability to cover interest payments. However, there has been a gradual decline in subsequent quarters, with the ratio decreasing to 6.25 in Q4 2023.
The declining trend in the interest coverage ratio may raise some concerns about Pentair plc's ability to meet its interest payments from its operating income. A ratio below 1 indicates that the company is not generating enough operating income to cover its interest expenses, which could potentially lead to financial distress or default.
It is essential for investors and stakeholders to closely monitor Pentair plc's interest coverage ratio and assess the company's financial health and debt servicing capacity in the future. Management may need to implement strategies to improve profitability and operational efficiency to enhance the interest coverage ratio and ensure sustainable financial performance.
Peer comparison
Dec 31, 2023