Royal Caribbean Cruises Ltd (RCL)

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	2,877,996	2,323,745	1,357,070	366,845	-763,976	-1,811,167	-3,115,412	-3,920,298	-3,870,321	-3,855,131	-3,845,425	-4,104,385	-4,601,564	-3,285,589	-1,398,683	457,460	2,082,701	2,147,303	2,056,244	1,939,486
Interest expense (ttm)	US$ in thousands	1,402,000	1,487,129	1,498,696	1,445,890	1,364,162	1,216,319	1,294,793	1,296,898	1,291,753	1,281,075	1,109,763	1,023,841	844,238	665,905	508,594	401,009	408,513	411,177	395,649	366,209
Interest coverage		2.05	1.56	0.91	0.25	-0.56	-1.49	-2.41	-3.02	-3.00	-3.01	-3.47	-4.01	-5.45	-4.93	-2.75	1.14	5.10	5.22	5.20	5.30

December 31, 2023 calculation

Interest coverage = EBIT (ttm) ÷ Interest expense (ttm)
= $2,877,996K ÷ $1,402,000K
= 2.05

The interest coverage ratio measures the ability of Royal Caribbean Group to meet its interest payment obligations. A higher ratio indicates that the company is more capable of servicing its debt with its operating profits.

Looking at the trend over the past eight quarters, we can see that Royal Caribbean Group's interest coverage ratio has been fluctuating. In the most recent quarter, Q4 2023, the company had an interest coverage ratio of 2.25, which suggests that Royal Caribbean Group generated operating profits 2.25 times more than its interest expenses. This is an improvement from the previous quarters, indicating a positive trend in the company's ability to cover its interest payments.

However, it is important to note that there were periods in the past where the interest coverage ratio was negative, which means that the company's operating profits were insufficient to cover its interest expenses. This is a concerning sign as it indicates a potential cash flow issue and may pose a risk to the company's financial health.

In summary, while Royal Caribbean Group's interest coverage ratio has shown improvement in the most recent quarter, investors and stakeholders should closely monitor this ratio to ensure that the company can consistently meet its interest payment obligations in the long term.