Waters Corporation (WAT)

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	817,676	839,736	852,320	852,093	873,395	849,312	849,117	845,907	821,707	823,218	788,748	747,218	644,520	617,226	632,620	655,040	707,094	715,209	714,257	716,138
Interest expense (ttm)	US$ in thousands	98,861	82,057	64,035	52,182	46,683	43,668	42,329	42,937	44,938	45,112	40,939	37,927	37,024	40,189	41,282	37,844	31,049	28,502	22,134	28,249
Interest coverage		8.27	10.23	13.31	16.33	18.71	19.45	20.06	19.70	18.29	18.25	19.27	19.70	17.41	15.36	15.32	17.31	22.77	25.09	32.27	25.35

December 31, 2023 calculation

Interest coverage = EBIT (ttm) ÷ Interest expense (ttm)
= $817,676K ÷ $98,861K
= 8.27

Waters Corp.'s interest coverage has exhibited a declining trend over the past quarters, indicating a potential increase in financial risk. The interest coverage ratio measures the company's ability to meet interest payments on its outstanding debt with its operating income. A higher interest coverage ratio is generally preferred as it suggests that the company is comfortably able to cover its interest obligations.

In Q1 2023, Waters Corp. had an interest coverage ratio of 21.73, which declined from the previous quarter's ratio of 17.20. This trend of decreasing interest coverage continued from the previous periods where the ratios were progressively lower.

The company's interest coverage ratio in Q4 2022 was at its highest at 23.38 and has been on a declining trend since then. As the interest coverage ratio has been consistently above 1 in all periods, it indicates that Waters Corp. has generated sufficient operating income to cover its interest expenses.

However, the decreasing trend in interest coverage ratios warrants monitoring, as it may indicate a potential strain on the company's ability to cover its interest payments from its operating income. Investors and creditors may view a declining interest coverage ratio as a red flag, signifying the need for the company to address its debt servicing capabilities to avoid financial distress.