Southern Company (SO)
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 | 7,972,000 | 6,782,000 | 5,910,000 | 4,332,000 | 5,295,000 |
| Interest expense | US$ in thousands | 2,743,000 | 2,446,000 | 2,022,000 | 1,837,000 | 1,821,000 |
| Interest coverage | 2.91 | 2.77 | 2.92 | 2.36 | 2.91 |
December 31, 2024 calculation
Interest coverage = EBIT ÷ Interest expense
= $7,972,000K ÷ $2,743,000K
= 2.91
The interest coverage ratio for Southern Company has shown some fluctuations over the past five years. At the end of December 31, 2020, the interest coverage ratio was 2.91, indicating that the company generated 2.91 times the earnings necessary to cover its interest expenses.
However, by the end of December 31, 2021, the interest coverage ratio decreased to 2.36, suggesting a slight deterioration in the company's ability to cover its interest obligations with operating income.
Subsequently, there was a rebound in the interest coverage ratio to 2.92 by the end of December 31, 2022, indicating an improvement in the company's ability to meet its interest payments.
The ratio then dipped to 2.77 by the end of December 31, 2023, before recovering to 2.91 by the end of December 31, 2024. Despite the fluctuations, the interest coverage ratio generally remained at a level above 2, which is considered acceptable and indicates that Southern Company has been able to meet its interest expenses comfortably with its operating earnings.
Overall, Southern Company's interest coverage ratio demonstrates its ability to manage its interest obligations, although monitoring trends in the ratio over time will be important to assess the company's financial health and ability to service its debts.
Peer comparison
Dec 31, 2024