Union Pacific Corporation (UNP)
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 | 9,573,000 | 10,343,000 | 9,635,000 | 8,121,000 | 8,797,000 |
| Interest expense | US$ in thousands | 1,340,000 | 1,271,000 | 1,157,000 | 1,141,000 | 1,050,000 |
| Interest coverage | 7.14 | 8.14 | 8.33 | 7.12 | 8.38 |
December 31, 2023 calculation
Interest coverage = EBIT ÷ Interest expense
= $9,573,000K ÷ $1,340,000K
= 7.14
The interest coverage ratio for Union Pacific Corp. over the past five years has shown a decreasing trend from 8.67 in 2019 to 7.05 in 2023. This ratio indicates the company's ability to meet its interest obligations with its operating income. A higher interest coverage ratio is generally considered more favorable as it signifies that the company is more capable of servicing its debt.
Although the ratio has fluctuated over the years, it has generally remained above 7, indicating that Union Pacific Corp. has consistently generated sufficient operating income to cover its interest expenses. However, the slight decrease in the ratio over the period raises some concerns about the company's ability to comfortably service its debt obligations in the future, especially if operating income were to decline.
Overall, while the company's interest coverage ratios have been relatively healthy, management should continue to monitor this metric closely to ensure the sustainability of its debt servicing capabilities.
Peer comparison
Dec 31, 2023