Analysis of Solvency Ratios
Quarterly Data
Solvency ratios also known as long-term debt ratios measure a company ability to meet long-term obligations.
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- Income Statement
- Statement of Comprehensive Income
- Common-Size Income Statement
- Analysis of Liquidity Ratios
- Analysis of Short-term (Operating) Activity Ratios
- Analysis of Long-term (Investment) Activity Ratios
- Enterprise Value (EV)
- Present Value of Free Cash Flow to Equity (FCFE)
- Total Asset Turnover since 2005
- Price to Sales (P/S) since 2005
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Solvency Ratios (Summary)
Emerson Electric Co., solvency ratios (quarterly data)
Based on: 10-Q (reporting date: 2020-03-31), 10-Q (reporting date: 2019-12-31), 10-K (reporting date: 2019-09-30), 10-Q (reporting date: 2019-06-30), 10-Q (reporting date: 2019-03-31), 10-Q (reporting date: 2018-12-31), 10-K (reporting date: 2018-09-30), 10-Q (reporting date: 2018-06-30), 10-Q (reporting date: 2018-03-31), 10-Q (reporting date: 2017-12-31), 10-K (reporting date: 2017-09-30), 10-Q (reporting date: 2017-06-30), 10-Q (reporting date: 2017-03-31), 10-Q (reporting date: 2016-12-31), 10-K (reporting date: 2016-09-30), 10-Q (reporting date: 2016-06-30), 10-Q (reporting date: 2016-03-31), 10-Q (reporting date: 2015-12-31), 10-K (reporting date: 2015-09-30), 10-Q (reporting date: 2015-06-30), 10-Q (reporting date: 2015-03-31), 10-Q (reporting date: 2014-12-31), 10-K (reporting date: 2014-09-30), 10-Q (reporting date: 2014-06-30), 10-Q (reporting date: 2014-03-31), 10-Q (reporting date: 2013-12-31).
The financial data reveals several observable trends in key leverage and coverage ratios over the period from December 2013 through March 2020.
- Debt to Equity
- This ratio demonstrates an overall upward trend from 0.54 in December 2013 to a peak of 1.02 in March 2020, indicating an increasing reliance on debt financing relative to equity. Notably, there is a significant drop around December 2016 to March 2017, followed by fluctuations thereafter. The ratio's rebound toward the end suggests increased leverage.
- Debt to Capital
- The debt to capital ratio follows a similar pattern to the debt to equity ratio. Starting at 0.35 in December 2013, it rises steadily to approximately 0.5 by December 2015. After a decrease period showing values around 0.34 to 0.4 between early 2016 and late 2018, it climbs again, reaching 0.51 by March 2020. This trend corroborates the increased use of debt within the company's capital structure towards the latter periods.
- Debt to Assets
- This ratio also rises over time, from 0.24 at the start of the series to 0.35 in March 2020. There is a clear increase through 2014 and 2015, peaking at 0.35, followed by a reduction around late 2016 to early 2018, before again trending upwards late in the series. This suggests growing debt-incurred assets coverage, with some periods of deleveraging.
- Financial Leverage
- Financial leverage increases overall from 2.25 at the start in 2013 to 2.89 by March 2020, consistent with the other debt ratios. The ratio peaks at the end of 2015, drops near the end of 2016, and then resumes a gradual upward slope. The fluctuations indicate periods of adjustment in capital structure or asset base changes.
- Interest Coverage
- Interest coverage ratios, available from June 2014 onward, start strong at 16.36 and rise to a high of 21.81 by September 2015, suggesting robust earnings available to cover interest expenses during this period. However, from late 2015, there is a declining trend down to approximately 11.77 at the end of 2016, reflecting possible pressure on operating income or increased interest expenses. After this low, the ratio stabilizes and gradually improves toward values around 15–16 by early 2020, indicating some recovery in interest expense coverage.
In summary, the data depicts a company that has generally increased its leverage over the observed years, with debt ratios rising and financial leverage trending upward. Interest coverage ratios show fluctuations with a peak followed by some deterioration and later stabilization, indicating periods of both strong and strained ability to meet interest obligations. The trends suggest active management of debt levels and capital structure adjustments in response to changing operational or market conditions.
Debt Ratios
Coverage Ratios
Debt to Equity
Emerson Electric Co., debt to equity calculation (quarterly data)
| Mar 31, 2020 | Dec 31, 2019 | Sep 30, 2019 | Jun 30, 2019 | Mar 31, 2019 | Dec 31, 2018 | Sep 30, 2018 | Jun 30, 2018 | Mar 31, 2018 | Dec 31, 2017 | Sep 30, 2017 | Jun 30, 2017 | Mar 31, 2017 | Dec 31, 2016 | Sep 30, 2016 | Jun 30, 2016 | Mar 31, 2016 | Dec 31, 2015 | Sep 30, 2015 | Jun 30, 2015 | Mar 31, 2015 | Dec 31, 2014 | Sep 30, 2014 | Jun 30, 2014 | Mar 31, 2014 | Dec 31, 2013 | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||||||||||||||||||||||||||||||
| Short-term borrowings and current maturities of long-term debt | ||||||||||||||||||||||||||||||||||
| Long-term debt, excluding current maturities | ||||||||||||||||||||||||||||||||||
| Total debt | ||||||||||||||||||||||||||||||||||
| Common stockholders’ equity | ||||||||||||||||||||||||||||||||||
| Solvency Ratio | ||||||||||||||||||||||||||||||||||
| Debt to equity1 | ||||||||||||||||||||||||||||||||||
| Benchmarks | ||||||||||||||||||||||||||||||||||
| Debt to Equity, Competitors2 | ||||||||||||||||||||||||||||||||||
| Boeing Co. | ||||||||||||||||||||||||||||||||||
| Caterpillar Inc. | ||||||||||||||||||||||||||||||||||
| Eaton Corp. plc | ||||||||||||||||||||||||||||||||||
| GE Aerospace | ||||||||||||||||||||||||||||||||||
| Honeywell International Inc. | ||||||||||||||||||||||||||||||||||
| Lockheed Martin Corp. | ||||||||||||||||||||||||||||||||||
| RTX Corp. | ||||||||||||||||||||||||||||||||||
Based on: 10-Q (reporting date: 2020-03-31), 10-Q (reporting date: 2019-12-31), 10-K (reporting date: 2019-09-30), 10-Q (reporting date: 2019-06-30), 10-Q (reporting date: 2019-03-31), 10-Q (reporting date: 2018-12-31), 10-K (reporting date: 2018-09-30), 10-Q (reporting date: 2018-06-30), 10-Q (reporting date: 2018-03-31), 10-Q (reporting date: 2017-12-31), 10-K (reporting date: 2017-09-30), 10-Q (reporting date: 2017-06-30), 10-Q (reporting date: 2017-03-31), 10-Q (reporting date: 2016-12-31), 10-K (reporting date: 2016-09-30), 10-Q (reporting date: 2016-06-30), 10-Q (reporting date: 2016-03-31), 10-Q (reporting date: 2015-12-31), 10-K (reporting date: 2015-09-30), 10-Q (reporting date: 2015-06-30), 10-Q (reporting date: 2015-03-31), 10-Q (reporting date: 2014-12-31), 10-K (reporting date: 2014-09-30), 10-Q (reporting date: 2014-06-30), 10-Q (reporting date: 2014-03-31), 10-Q (reporting date: 2013-12-31).
1 Q2 2020 Calculation
Debt to equity = Total debt ÷ Common stockholders’ equity
= ÷ =
2 Click competitor name to see calculations.
An analysis of the financial data over the observed periods reveals several notable trends in the company's capital structure and leverage.
- Total Debt
- The total debt fluctuated significantly throughout the timeframe. Initially, it showed a rising trend from December 2013 through June 2015, increasing from $5.79 billion to a peak of approximately $7.47 billion. Subsequently, total debt experienced a general decline, reaching a low point around $4.07 billion by December 2016. However, from that period onwards, total debt increased again, reaching a high near $7.70 billion by March 2020. These fluctuations suggest periods of increased borrowing and deleveraging aligned with varying financial strategies or market conditions.
- Common Stockholders’ Equity
- The equity base demonstrated a gradual downward trend from December 2013 through December 2015, decreasing from $10.74 billion to $7.46 billion. In subsequent periods, equity levels slightly recovered and stabilized around the $7.5 billion to $8.5 billion range, with minor fluctuations. The equity peaked at about $8.95 billion at the end of 2018 before experiencing another decline towards the end of the period, ending at $7.52 billion in March 2020. The equity changes imply shifts in retained earnings, possible share repurchases, or other equity-affecting transactions.
- Debt to Equity Ratio
- The leverage ratio increased notably from 0.54 in December 2013 to a peak of 1.00 in December 2015, indicating a rise in financial leverage where debt equaled equity. Following this peak, the ratio reduced sharply to approximately 0.51-0.53 during late 2016 and early 2017, reflecting a significant deleveraging phase. However, after this period of reduced leverage, the ratio rose gradually again, fluctuating between 0.65 and 0.74 from 2017 to 2019. Notably, the ratio ended at 1.02 in March 2020, marking the highest leverage within the span and indicating that total debt slightly exceeded equity at that time. This pattern suggests strategic adjustments in financing, including periods of increased borrowing and capital restructuring.
Overall, the financial data reveals cyclical patterns in leverage and equity levels. Periods of debt accumulation have been followed by notable deleveraging, reflecting responsive financial management to prevailing economic or operational conditions. The rising debt to equity ratio toward the end of the period merits attention for potential impacts on financial risk and solvency.
Debt to Capital
Emerson Electric Co., debt to capital calculation (quarterly data)
| Mar 31, 2020 | Dec 31, 2019 | Sep 30, 2019 | Jun 30, 2019 | Mar 31, 2019 | Dec 31, 2018 | Sep 30, 2018 | Jun 30, 2018 | Mar 31, 2018 | Dec 31, 2017 | Sep 30, 2017 | Jun 30, 2017 | Mar 31, 2017 | Dec 31, 2016 | Sep 30, 2016 | Jun 30, 2016 | Mar 31, 2016 | Dec 31, 2015 | Sep 30, 2015 | Jun 30, 2015 | Mar 31, 2015 | Dec 31, 2014 | Sep 30, 2014 | Jun 30, 2014 | Mar 31, 2014 | Dec 31, 2013 | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||||||||||||||||||||||||||||||
| Short-term borrowings and current maturities of long-term debt | ||||||||||||||||||||||||||||||||||
| Long-term debt, excluding current maturities | ||||||||||||||||||||||||||||||||||
| Total debt | ||||||||||||||||||||||||||||||||||
| Common stockholders’ equity | ||||||||||||||||||||||||||||||||||
| Total capital | ||||||||||||||||||||||||||||||||||
| Solvency Ratio | ||||||||||||||||||||||||||||||||||
| Debt to capital1 | ||||||||||||||||||||||||||||||||||
| Benchmarks | ||||||||||||||||||||||||||||||||||
| Debt to Capital, Competitors2 | ||||||||||||||||||||||||||||||||||
| Boeing Co. | ||||||||||||||||||||||||||||||||||
| Caterpillar Inc. | ||||||||||||||||||||||||||||||||||
| Eaton Corp. plc | ||||||||||||||||||||||||||||||||||
| GE Aerospace | ||||||||||||||||||||||||||||||||||
| Honeywell International Inc. | ||||||||||||||||||||||||||||||||||
| Lockheed Martin Corp. | ||||||||||||||||||||||||||||||||||
| RTX Corp. | ||||||||||||||||||||||||||||||||||
Based on: 10-Q (reporting date: 2020-03-31), 10-Q (reporting date: 2019-12-31), 10-K (reporting date: 2019-09-30), 10-Q (reporting date: 2019-06-30), 10-Q (reporting date: 2019-03-31), 10-Q (reporting date: 2018-12-31), 10-K (reporting date: 2018-09-30), 10-Q (reporting date: 2018-06-30), 10-Q (reporting date: 2018-03-31), 10-Q (reporting date: 2017-12-31), 10-K (reporting date: 2017-09-30), 10-Q (reporting date: 2017-06-30), 10-Q (reporting date: 2017-03-31), 10-Q (reporting date: 2016-12-31), 10-K (reporting date: 2016-09-30), 10-Q (reporting date: 2016-06-30), 10-Q (reporting date: 2016-03-31), 10-Q (reporting date: 2015-12-31), 10-K (reporting date: 2015-09-30), 10-Q (reporting date: 2015-06-30), 10-Q (reporting date: 2015-03-31), 10-Q (reporting date: 2014-12-31), 10-K (reporting date: 2014-09-30), 10-Q (reporting date: 2014-06-30), 10-Q (reporting date: 2014-03-31), 10-Q (reporting date: 2013-12-31).
1 Q2 2020 Calculation
Debt to capital = Total debt ÷ Total capital
= ÷ =
2 Click competitor name to see calculations.
An analysis of the quarterly financial data over the observed periods reveals notable fluctuations in total debt, total capital, and the debt to capital ratio, indicating changes in the company’s capital structure and leverage management.
- Total Debt
-
Total debt shows variability with an overall increasing tendency across the timeline. Initially, debt increased from approximately 5.8 billion USD at the end of 2013, peaking several times near 7.7 billion USD in the first quarter of 2020. Notably, after a peak around the end of 2015, debt levels briefly declined by the end of 2016, then rose again in the latter periods. This suggests periods of debt repayment followed by additional borrowing or financing activities.
- Total Capital
-
Total capital demonstrates a somewhat less volatile pattern compared to debt but still experiences some downward and upward trends. The capital base started near 16.5 billion USD at the end of 2013, declining to a low point near 11.8 billion USD at the end of 2016, before gradually increasing again to reach over 15 billion USD by early 2020. This indicates that after a contraction period in the middle of the observed range, capital accumulation resumed possibly due to retained earnings or equity infusion.
- Debt to Capital Ratio
-
The debt to capital ratio varied between 0.34 and 0.51, reflecting changes in the relative proportion of debt within the overall capital structure. Initially, the ratio rose from 0.35 at the end of 2013 to its peak of 0.5 around the end of 2015, indicating increased leverage. Subsequently, it decreased to approximately 0.34 at the end of the first quarter of 2017, reflecting reduced leverage, likely due to a combination of lower debt and increased capital. However, the ratio climbed again through the last reported period to 0.51 by March 2020, revealing a renewed increase in leverage.
In summary, the data indicates cycles of borrowing and deleveraging within the company’s capital management strategy. Periods of increasing debt appear interspersed with phases of capital reduction and then recovery. The fluctuations in the debt to capital ratio are consistent with these observations, suggesting an active approach to balancing debt financing relative to equity or other forms of capital. The overall trend towards higher leverage at the close of the analyzed timeframe may imply increased financial risk or strategic investment undertaken through debt.
Debt to Assets
Emerson Electric Co., debt to assets calculation (quarterly data)
| Mar 31, 2020 | Dec 31, 2019 | Sep 30, 2019 | Jun 30, 2019 | Mar 31, 2019 | Dec 31, 2018 | Sep 30, 2018 | Jun 30, 2018 | Mar 31, 2018 | Dec 31, 2017 | Sep 30, 2017 | Jun 30, 2017 | Mar 31, 2017 | Dec 31, 2016 | Sep 30, 2016 | Jun 30, 2016 | Mar 31, 2016 | Dec 31, 2015 | Sep 30, 2015 | Jun 30, 2015 | Mar 31, 2015 | Dec 31, 2014 | Sep 30, 2014 | Jun 30, 2014 | Mar 31, 2014 | Dec 31, 2013 | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||||||||||||||||||||||||||||||
| Short-term borrowings and current maturities of long-term debt | ||||||||||||||||||||||||||||||||||
| Long-term debt, excluding current maturities | ||||||||||||||||||||||||||||||||||
| Total debt | ||||||||||||||||||||||||||||||||||
| Total assets | ||||||||||||||||||||||||||||||||||
| Solvency Ratio | ||||||||||||||||||||||||||||||||||
| Debt to assets1 | ||||||||||||||||||||||||||||||||||
| Benchmarks | ||||||||||||||||||||||||||||||||||
| Debt to Assets, Competitors2 | ||||||||||||||||||||||||||||||||||
| Boeing Co. | ||||||||||||||||||||||||||||||||||
| Caterpillar Inc. | ||||||||||||||||||||||||||||||||||
| Eaton Corp. plc | ||||||||||||||||||||||||||||||||||
| GE Aerospace | ||||||||||||||||||||||||||||||||||
| Honeywell International Inc. | ||||||||||||||||||||||||||||||||||
| Lockheed Martin Corp. | ||||||||||||||||||||||||||||||||||
| RTX Corp. | ||||||||||||||||||||||||||||||||||
Based on: 10-Q (reporting date: 2020-03-31), 10-Q (reporting date: 2019-12-31), 10-K (reporting date: 2019-09-30), 10-Q (reporting date: 2019-06-30), 10-Q (reporting date: 2019-03-31), 10-Q (reporting date: 2018-12-31), 10-K (reporting date: 2018-09-30), 10-Q (reporting date: 2018-06-30), 10-Q (reporting date: 2018-03-31), 10-Q (reporting date: 2017-12-31), 10-K (reporting date: 2017-09-30), 10-Q (reporting date: 2017-06-30), 10-Q (reporting date: 2017-03-31), 10-Q (reporting date: 2016-12-31), 10-K (reporting date: 2016-09-30), 10-Q (reporting date: 2016-06-30), 10-Q (reporting date: 2016-03-31), 10-Q (reporting date: 2015-12-31), 10-K (reporting date: 2015-09-30), 10-Q (reporting date: 2015-06-30), 10-Q (reporting date: 2015-03-31), 10-Q (reporting date: 2014-12-31), 10-K (reporting date: 2014-09-30), 10-Q (reporting date: 2014-06-30), 10-Q (reporting date: 2014-03-31), 10-Q (reporting date: 2013-12-31).
1 Q2 2020 Calculation
Debt to assets = Total debt ÷ Total assets
= ÷ =
2 Click competitor name to see calculations.
The financial data indicates fluctuations in total debt, total assets, and the debt-to-assets ratio over the observed periods, revealing patterns in the company’s leverage and asset base.
- Total Debt
-
Total debt exhibited periodic increases and decreases across the timeline. Starting at $5,792 million, the debt rose to peaks around the mid-2015 and early 2020 periods, notably reaching $7,701 million by March 2020. Some declines are observed near late 2016 and late 2018, with the lowest value in this range at $4,069 million in December 2016. This pattern signifies cyclical adjustments or strategic shifts affecting borrowing levels over time.
- Total Assets
-
The total asset base showed a generally decreasing trend during the earlier periods, beginning around $24,124 million and declining to approximately $17,277 million by early 2017. From then onwards, the asset value recovered and stabilized, increasing toward the later quarters, reaching about $21,711 million by March 2020. This recovery suggests asset growth initiatives or revaluation, offsetting the earlier decline.
- Debt-to-Assets Ratio
-
The debt-to-assets ratio reflected the interplay between debt and asset values. It initially increased from 0.24 to a peak near 0.35 during late 2015, indicating rising leverage. A notable dip to around 0.23 occurred in late 2016 and early 2018, coinciding with lower debt or higher asset levels. Toward the end of the dataset, the ratio rose again to about 0.35, signaling increased indebtedness relative to assets. These variations underline shifts in the company’s capital structure and risk profile over time.
Financial Leverage
Emerson Electric Co., financial leverage calculation (quarterly data)
| Mar 31, 2020 | Dec 31, 2019 | Sep 30, 2019 | Jun 30, 2019 | Mar 31, 2019 | Dec 31, 2018 | Sep 30, 2018 | Jun 30, 2018 | Mar 31, 2018 | Dec 31, 2017 | Sep 30, 2017 | Jun 30, 2017 | Mar 31, 2017 | Dec 31, 2016 | Sep 30, 2016 | Jun 30, 2016 | Mar 31, 2016 | Dec 31, 2015 | Sep 30, 2015 | Jun 30, 2015 | Mar 31, 2015 | Dec 31, 2014 | Sep 30, 2014 | Jun 30, 2014 | Mar 31, 2014 | Dec 31, 2013 | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||||||||||||||||||||||||||||||
| Total assets | ||||||||||||||||||||||||||||||||||
| Common stockholders’ equity | ||||||||||||||||||||||||||||||||||
| Solvency Ratio | ||||||||||||||||||||||||||||||||||
| Financial leverage1 | ||||||||||||||||||||||||||||||||||
| Benchmarks | ||||||||||||||||||||||||||||||||||
| Financial Leverage, Competitors2 | ||||||||||||||||||||||||||||||||||
| Boeing Co. | ||||||||||||||||||||||||||||||||||
| Caterpillar Inc. | ||||||||||||||||||||||||||||||||||
| Eaton Corp. plc | ||||||||||||||||||||||||||||||||||
| GE Aerospace | ||||||||||||||||||||||||||||||||||
| Honeywell International Inc. | ||||||||||||||||||||||||||||||||||
| Lockheed Martin Corp. | ||||||||||||||||||||||||||||||||||
| RTX Corp. | ||||||||||||||||||||||||||||||||||
Based on: 10-Q (reporting date: 2020-03-31), 10-Q (reporting date: 2019-12-31), 10-K (reporting date: 2019-09-30), 10-Q (reporting date: 2019-06-30), 10-Q (reporting date: 2019-03-31), 10-Q (reporting date: 2018-12-31), 10-K (reporting date: 2018-09-30), 10-Q (reporting date: 2018-06-30), 10-Q (reporting date: 2018-03-31), 10-Q (reporting date: 2017-12-31), 10-K (reporting date: 2017-09-30), 10-Q (reporting date: 2017-06-30), 10-Q (reporting date: 2017-03-31), 10-Q (reporting date: 2016-12-31), 10-K (reporting date: 2016-09-30), 10-Q (reporting date: 2016-06-30), 10-Q (reporting date: 2016-03-31), 10-Q (reporting date: 2015-12-31), 10-K (reporting date: 2015-09-30), 10-Q (reporting date: 2015-06-30), 10-Q (reporting date: 2015-03-31), 10-Q (reporting date: 2014-12-31), 10-K (reporting date: 2014-09-30), 10-Q (reporting date: 2014-06-30), 10-Q (reporting date: 2014-03-31), 10-Q (reporting date: 2013-12-31).
1 Q2 2020 Calculation
Financial leverage = Total assets ÷ Common stockholders’ equity
= ÷ =
2 Click competitor name to see calculations.
- Total Assets
- The total assets exhibit a fluctuating pattern over the observed time frame. Initially, there is a gradual increase from 24,124 million USD at the end of 2013 to a peak around mid-2014, followed by a general decline through to the end of 2016, where the lowest point is noted at 17,471 million USD. Subsequently, total assets demonstrate a recovery phase from early 2017 onwards, with values rising and stabilizing roughly between 20,000 million USD and 21,700 million USD towards early 2020. This pattern suggests periods of asset reduction possibly due to divestitures or depreciation, with renewed asset accumulation or acquisition activity in the later years.
- Common Stockholders’ Equity
- Common stockholders’ equity shows a consistent downward trend from the end of 2013, starting at 10,741 million USD, reaching a minimum towards the end of 2015 at 7,456 million USD. Following this, there is a moderate recovery through most of 2017, peaking around 8,718 million USD in September 2017. However, the equity value decreases again gradually until the first quarter of 2020, ending at 7,517 million USD. The declining trend in equity over the entire period indicates potential challenges in retained earnings or increased distributions, although the intermittent recovery phases suggest tactical equity reinforcements or improved profitability during these intervals.
- Financial Leverage
- The financial leverage ratio follows a general increasing trajectory from 2.25 at the end of 2013 to a high of 2.89 by the end of 2015. After declining to approximately 2.16 in the first quarter of 2017, it fluctuates around the mid-2.3 to 2.5 range until early 2020, reaching again the upper bound of 2.89 just before the first quarter of 2020. This increase in leverage ratio over time indicates a rising reliance on debt financing relative to equity, potentially reflecting strategic leveraging to finance asset growth or manage capital structure. The temporary decrease observed in early 2017 might indicate deleveraging activities or equity base strengthening, but the overall pattern underlines a higher risk profile due to increased financial obligations.
Interest Coverage
Emerson Electric Co., interest coverage calculation (quarterly data)
| Mar 31, 2020 | Dec 31, 2019 | Sep 30, 2019 | Jun 30, 2019 | Mar 31, 2019 | Dec 31, 2018 | Sep 30, 2018 | Jun 30, 2018 | Mar 31, 2018 | Dec 31, 2017 | Sep 30, 2017 | Jun 30, 2017 | Mar 31, 2017 | Dec 31, 2016 | Sep 30, 2016 | Jun 30, 2016 | Mar 31, 2016 | Dec 31, 2015 | Sep 30, 2015 | Jun 30, 2015 | Mar 31, 2015 | Dec 31, 2014 | Sep 30, 2014 | Jun 30, 2014 | Mar 31, 2014 | Dec 31, 2013 | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||||||||||||||||||||||||||||||
| Net earnings common stockholders | ||||||||||||||||||||||||||||||||||
| Add: Net income attributable to noncontrolling interest | ||||||||||||||||||||||||||||||||||
| Less: Discontinued operations, net of tax | ||||||||||||||||||||||||||||||||||
| Add: Income tax expense | ||||||||||||||||||||||||||||||||||
| Add: Interest expense | ||||||||||||||||||||||||||||||||||
| Earnings before interest and tax (EBIT) | ||||||||||||||||||||||||||||||||||
| Solvency Ratio | ||||||||||||||||||||||||||||||||||
| Interest coverage1 | ||||||||||||||||||||||||||||||||||
| Benchmarks | ||||||||||||||||||||||||||||||||||
| Interest Coverage, Competitors2 | ||||||||||||||||||||||||||||||||||
| Boeing Co. | ||||||||||||||||||||||||||||||||||
| Caterpillar Inc. | ||||||||||||||||||||||||||||||||||
| Eaton Corp. plc | ||||||||||||||||||||||||||||||||||
| GE Aerospace | ||||||||||||||||||||||||||||||||||
| Honeywell International Inc. | ||||||||||||||||||||||||||||||||||
| Lockheed Martin Corp. | ||||||||||||||||||||||||||||||||||
Based on: 10-Q (reporting date: 2020-03-31), 10-Q (reporting date: 2019-12-31), 10-K (reporting date: 2019-09-30), 10-Q (reporting date: 2019-06-30), 10-Q (reporting date: 2019-03-31), 10-Q (reporting date: 2018-12-31), 10-K (reporting date: 2018-09-30), 10-Q (reporting date: 2018-06-30), 10-Q (reporting date: 2018-03-31), 10-Q (reporting date: 2017-12-31), 10-K (reporting date: 2017-09-30), 10-Q (reporting date: 2017-06-30), 10-Q (reporting date: 2017-03-31), 10-Q (reporting date: 2016-12-31), 10-K (reporting date: 2016-09-30), 10-Q (reporting date: 2016-06-30), 10-Q (reporting date: 2016-03-31), 10-Q (reporting date: 2015-12-31), 10-K (reporting date: 2015-09-30), 10-Q (reporting date: 2015-06-30), 10-Q (reporting date: 2015-03-31), 10-Q (reporting date: 2014-12-31), 10-K (reporting date: 2014-09-30), 10-Q (reporting date: 2014-06-30), 10-Q (reporting date: 2014-03-31), 10-Q (reporting date: 2013-12-31).
1 Q2 2020 Calculation
Interest coverage
= (EBITQ2 2020
+ EBITQ1 2020
+ EBITQ4 2019
+ EBITQ3 2019)
÷ (Interest expenseQ2 2020
+ Interest expenseQ1 2020
+ Interest expenseQ4 2019
+ Interest expenseQ3 2019)
= ( + + + )
÷ ( + + + )
=
2 Click competitor name to see calculations.
The analysis of the quarterly financial data reveals several notable trends regarding earnings before interest and tax (EBIT), interest expense, and interest coverage over the observed periods.
- Earnings before interest and tax (EBIT)
- EBIT shows significant fluctuations throughout the quarters. Starting at 704 million USD at the end of 2013, it demonstrates a marked rise in the early quarters of 2014, reaching a peak of 1125 million USD in June 2014. Afterward, EBIT declines to 818 million USD by December 2014. The value spikes again in March 2015 to 1653 million USD, the highest point in the entire dataset, before dropping sharply to 487 million USD by December 2015. From 2016 onwards, EBIT stabilizes somewhat with moderate ups and downs, ranging between approximately 516 million USD and 874 million USD, but never achieving the earlier peaks. The data shows a general resilience with some recovery phases, yet the volatility suggests cyclical or event-driven impacts affecting operating profitability.
- Interest Expense
- Interest expense remains relatively stable for most periods, fluctuating within a narrow range from 41 million USD to 61 million USD. The highest interest expense is observed at the end of 2013 with 61 million USD, followed by a slight decline and stabilization around the low 50s range over subsequent quarters. Notably, the interest expense decreases slightly towards early 2020, reaching 41 to 42 million USD, indicating a potential reduction in borrowing costs or debt levels during that time.
- Interest Coverage Ratio
- The interest coverage ratio is available only from the third quarter of 2014 onwards and shows an initial strong position with values between 16 and 22 times, reflecting robust earnings relative to interest obligations. After its peak around late 2014 and early 2015, the ratio declines gradually, settling between 11 and 15 times from 2015 through to early 2020. The declining trend signifies a reduction in the cushion between EBIT and interest expenses, although the ratio remains at levels generally considered comfortable for covering interest payments. The relative stability despite fluctuations in EBIT suggests controlled interest expenses mitigating fluctuations in coverage.
In summary, the company's EBIT experiences considerable volatility with high peaks and significant declines, while the interest expense remains stable and even decreases slightly over time. The interest coverage ratio transitions from very high levels to a moderately strong position, indicating a reduced but still sufficient ability to meet interest obligations from earnings. Overall, these trends suggest a business undergoing periods of earnings variability but maintaining stable and manageable interest costs, preserving its financial stability in terms of debt servicing capacity.