Top-line growth slowed in Q2 but EBITDA picked up, Reorg data shows

Global credit intelligence and data firm Reorg said its latest U.S. Earnings Analytics Report for Q2 2024 shows that while top-line growth among sub-investment grade borrowers continued to decelerate, EBITDA growth rebounded after nine consecutive quarters of decline.

According to the report, “median company EBITDA growth was 4.5%, up over the first quarter,” marking the first improvement in this metric since early 2022.

The report highlights that companies’ revenue performance has been weaker, with “half of the industries posting negative year-over-year changes.”

However, the uptick in EBITDA growth is said to suggest that businesses are managing to offset some inflationary pressures.

Reorg notes, “The median company continued to offset the effect of inflation by marginally improving the gap between inflation and EBITDA year-over-year growth.”

Sector-wise, financial companies stood out, leading in top-line growth, while commodity-exposed industries, such as energy and materials, faced negative growth.

This divergence in sector performance further illustrates the uneven economic environment across industries.

Another key takeaway, according to the firm, is the reversal in the declining trend of interest coverage ratios.

Reorg found that the “interest coverage trend of declines reversed after eight quarters, ticking up quarter over quarter by 0.2 times,” suggesting that companies are becoming slightly better positioned to manage their debt burdens despite economic headwinds.

Reorg’s Q2 2024 U.S. Earnings Analytics Report offers insights into the health of private and public sub-investment grade borrowers, showing resilience in EBITDA growth amidst broader challenges in top-line performance and the ongoing effects of inflation.