Timken Company (TKR)
Interest coverage
| Dec 31, 2024 | Sep 30, 2024 | Jun 30, 2024 | Mar 31, 2024 | 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 | ||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Earnings before interest and tax (EBIT) (ttm) | US$ in thousands | 621,900 | 595,400 | 610,500 | 643,200 | 647,100 | 701,600 | 709,000 | 682,100 | 665,000 | 618,800 | 580,600 | 554,500 | 539,200 | 528,900 | 536,300 | 493,100 | 464,100 | 498,800 | 479,700 | 518,200 |
| Interest expense (ttm) | US$ in thousands | 125,100 | 127,900 | 125,100 | 116,900 | 108,800 | 100,700 | 92,500 | 83,400 | 73,000 | 63,500 | 58,500 | 55,800 | 57,000 | 58,400 | 60,400 | 64,700 | 66,900 | 67,500 | 68,300 | 68,700 |
| Interest coverage | 4.97 | 4.66 | 4.88 | 5.50 | 5.95 | 6.97 | 7.66 | 8.18 | 9.11 | 9.74 | 9.92 | 9.94 | 9.46 | 9.06 | 8.88 | 7.62 | 6.94 | 7.39 | 7.02 | 7.54 |
December 31, 2024 calculation
Interest coverage = EBIT (ttm) ÷ Interest expense (ttm)
= $621,900K ÷ $125,100K
= 4.97
The interest coverage ratio of Timken Company demonstrates its ability to meet its interest obligations through its operating earnings. The trend in the interest coverage ratio shows a relatively stable and healthy performance from March 2020 to March 2022, with the ratio consistently above 7. However, there was a notable improvement from June 2021 to December 2022, with the interest coverage ratio rising steadily, peaking at 9.94 in March 2022.
Subsequently, from June 2022 to December 2024, the interest coverage ratio started declining. This downward trend indicates a potential decrease in the company's ability to cover its interest expenses from its operating income. By December 2024, the interest coverage ratio dropped to 4.97, which is a significant decrease compared to the peak in March 2022.
Overall, while Timken Company's interest coverage ratio remained relatively strong in the earlier periods, the declining trend in recent years raises concerns about the company's ability to comfortably meet its interest obligations solely through its operating earnings. It would be important for stakeholders to monitor this trend closely to assess the company's financial health and ability to manage its debt effectively.
Peer comparison
Dec 31, 2024