Pinnacle West Capital Corp (PNW)

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	1,012,060	824,640	731,911	805,310	788,152
Interest expense	US$ in thousands	425,742	331,323	255,539	233,262	228,971
Interest coverage		2.38	2.49	2.86	3.45	3.44

December 31, 2024 calculation

Interest coverage = EBIT ÷ Interest expense
= $1,012,060K ÷ $425,742K
= 2.38

The interest coverage ratio for Pinnacle West Capital Corp has shown a relatively stable trend over the past five years. As of December 31, 2020, the interest coverage ratio was 3.44, indicating that the company's operating profit was sufficient to cover its interest expenses about 3.44 times. This ratio increased marginally to 3.45 by December 31, 2021, suggesting a continued ability to meet interest obligations comfortably.

However, there was a slight decline in the interest coverage ratio in the following years. By December 31, 2022, the ratio decreased to 2.86, implying a slight weakening in the company's ability to cover interest expenses. This downward trend continued, with a further decrease to 2.49 by December 31, 2023, and 2.38 by December 31, 2024.

Overall, the decreasing trend in the interest coverage ratio in recent years may indicate a potential strain on the company's ability to service its debt obligations with its operating profits. It would be important for investors and stakeholders to closely monitor this ratio and assess the company's financial health and ability to manage its debt in the future.