Pinnacle West Capital Corp (PNW)

Interest coverage

		Dec 31, 2023	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019
Earnings before interest and tax (EBIT)	US$ in thousands	824,640	731,911	805,310	788,152	671,960
Interest expense	US$ in thousands	331,323	255,539	233,262	228,971	216,723
Interest coverage		2.49	2.86	3.45	3.44	3.10

December 31, 2023 calculation

Interest coverage = EBIT ÷ Interest expense
= $824,640K ÷ $331,323K
= 2.49

Pinnacle West Capital Corp.'s interest coverage has exhibited a declining trend over the past five years, decreasing from 3.26 in 2019 to 2.71 in 2023. This indicates that the company's ability to cover its interest expenses with its operating income has weakened.

While the interest coverage ratios above 1 suggest that the company generates sufficient operating income to cover its interest obligations, the decreasing trend warrants attention. A lower interest coverage ratio could signal financial risk, as it may become more challenging for the company to meet its interest payments from operating profits alone.

The declining interest coverage ratio could be a cause for concern for stakeholders, including lenders and investors. It may indicate a decrease in the company's profitability or an increase in its interest expenses, which could affect its financial stability and ability to meet debt obligations in the future.

Overall, monitoring the trend in Pinnacle West Capital Corp.'s interest coverage ratio over time is crucial for assessing the company's financial health and its ability to service its debt obligations effectively.