Valero Energy Corporation (VLO)

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	4,035,000	5,152,000	8,051,000	9,591,000	11,956,000	14,768,000	15,035,000	18,502,000	15,835,000	12,879,000	9,837,000	4,196,000	2,175,000	865,000	140,000	1,894,000	270,000	2,458,000	3,877,000	2,981,000
Interest expense (ttm)	US$ in thousands	556,000	570,000	578,000	586,000	592,000	580,000	569,000	563,000	562,000	577,000	591,000	599,000	603,000	604,000	595,000	587,000	563,000	529,000	497,000	467,000
Interest coverage		7.26	9.04	13.93	16.37	20.20	25.46	26.42	32.86	28.18	22.32	16.64	7.01	3.61	1.43	0.24	3.23	0.48	4.65	7.80	6.38

December 31, 2024 calculation

Interest coverage = EBIT (ttm) ÷ Interest expense (ttm)
= $4,035,000K ÷ $556,000K
= 7.26

Interest coverage ratio measures a company's ability to cover its interest expenses with its operating income. A higher interest coverage ratio indicates that the company is more capable of meeting its interest obligations.

Analyzing the interest coverage of Valero Energy Corporation over multiple quarters, we can observe fluctuations in the ratio. From March 31, 2020, to June 30, 2020, the ratio improved from 6.38 to 7.80, indicating better ability to cover interest expenses. However, there was a significant decline in the ratio by December 31, 2020, dropping to 0.48, which might raise concerns about Valero's ability to cover its interest obligations.

The company's interest coverage ratio continued to fluctuate over the following quarters, showing improvements and declines at various points. Notably, there was a sharp increase in the ratio by March 31, 2022, reaching 7.01, and experiencing significant growth over the subsequent quarters, peaking at 32.86 by March 31, 2023. This period may indicate a significant improvement in Valero's ability to cover interest expenses.

However, the ratio started to decline from the highest point observed and continued to decrease steadily by December 31, 2024, reaching 7.26. Despite the fluctuating trend in the interest coverage ratio, Valero Energy Corporation maintained a ratio above 1 throughout the analyzed period, indicating that the company generally had sufficient operating income to cover interest expenses. It is essential for investors and stakeholders to monitor this ratio to assess Valero's financial health and ability to manage debt obligations effectively.