Matson (MATX) Q1 2025 Earnings Call May 05, 2025 04:30 PM ET Speaker0 you for standing by and welcome to Matson's First Quarter twenty twenty five Financial Results Conference Call. At this time, all participants are in a listen only mode. After the speakers' presentation, there will be a question and answer session. As a reminder, today's program is being recorded. And now I'd like to introduce your host for today's program, Justin Schoenberg, Investor Relations and Corporate Development at Matson. Please ...

[Q1 2025 Financial & Operational Highlights](index=1&type=section&id=MATSON%2C%20INC.%20ANNOUNCES%20FIRST%20QUARTER%202025%20RESULTS) The company reported significant year-over-year increases in net income, diluted EPS, consolidated revenue, operating income, and EBITDA for Q1 2025, alongside share repurchases Financial Performance Overview | Financial Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net Income | $72.3 million | $36.1 million | | Diluted EPS | $2.18 | $1.04 | | Consolidated Revenue | $782.0 million | $722.1 million | | Consolidated Operating Income | $82.1 million | $36.9 million | | EBITDA | $131.7 million | $82.8 million | - The company repurchased approximately **0.5 million shares** during the first quarter of 2025[3](index=3&type=chunk) [Management Commentary & Outlook](index=1&type=section&id=Management%20Commentary%20%26%20Outlook) Management attributes strong Q1 performance to China service but anticipates significant uncertainty and lower operating income for Q2 and full-year 2025 across both Ocean Transportation and Logistics segments [CEO's Performance Review](index=1&type=section&id=CEO%27s%20Performance%20Review) The CEO attributed strong Q1 operating income to the China service, with mixed domestic tradelane volumes and lower Logistics segment performance - The primary driver for the strong Q1 performance was the China service, which benefited from elevated freight rates from Q4 2024 and healthy demand after the Lunar New Year[2](index=2&type=chunk) - Domestic tradelane volumes were higher year-over-year in Hawaii and Alaska, but lower in Guam[2](index=2&type=chunk) - Logistics operating income declined year-over-year, mainly due to reduced contributions from freight forwarding and transportation brokerage[2](index=2&type=chunk) [Business Outlook](index=1&type=section&id=Business%20Outlook) Management anticipates significant uncertainty from tariffs and global trade, projecting lower Q2 and full-year operating income for both Ocean Transportation and Logistics segments - The company faces significant uncertainty from potential tariffs, global trade dynamics, regulatory measures, and the U.S. economy's trajectory[2](index=2&type=chunk) - Ocean Transportation operating income for Q2 2025 is expected to be "meaningfully lower" than Q2 2024, with full-year income also projected to be lower than the prior year[2](index=2&type=chunk)[9](index=9&type=chunk) - Logistics operating income is also expected to be lower in Q2 2025 and for the full year compared to the prior year, attributed to a challenging environment across all its business lines[2](index=2&type=chunk)[10](index=10&type=chunk) [Segment Performance & Outlook](index=2&type=section&id=Results%20By%20Segment) Ocean Transportation operating income surged in Q1 due to China service rates, while Logistics declined, with both segments forecasting lower full-year performance amid market uncertainties [Ocean Transportation](index=2&type=section&id=Ocean%20Transportation) Ocean Transportation operating income surged 166.7% in Q1 2025 due to China service rates, but anticipates lower Q2 and full-year income amid declining demand and trade uncertainties Ocean Transportation Performance | Metric (Q1 2025 vs Q1 2024) | Q1 2025 | Q1 2024 | Change | | :--- | :--- | :--- | :--- | | Revenue | $637.4M | $579.0M | +10.1% | | Operating Income | $73.6M | $27.6M | +166.7% | | **Volume (FEU)** | | | | | Hawaii | 35,700 | 34,600 | +3.2% | | Alaska | 19,700 | 18,800 | +4.8% | | China | 28,500 | 28,900 | -1.4% | | Guam | 4,200 | 4,900 | -14.3% | - The increase in operating income was primarily due to significantly higher freight rates in China and a higher contribution from the SSAT joint venture[18](index=18&type=chunk) - For the full year 2025, Ocean Transportation operating income is expected to be lower than the prior year, with the magnitude dependent on global trade and macroeconomic uncertainties[9](index=9&type=chunk) [Hawaii Service](index=2&type=section&id=Hawaii%20Service) Hawaii service container volume increased 3.2% in Q1 2025 due to a competitor's dry-docking, with full-year volume expected to be comparable to 2024 - Q1 2025 volume increased **3.2% YoY**, primarily due to a competitor's vessel being in dry-dock[4](index=4&type=chunk) - Full-year 2025 volume is expected to be comparable to 2024 levels[4](index=4&type=chunk) [China Service](index=2&type=section&id=China%20Service) China service achieved significantly higher Q1 2025 freight rates, but anticipates lower Q2 and full-year volume and rates due to a 30% April decline post-tariffs - Achieved significantly higher freight rates in Q1 2025 compared to Q1 2024[5](index=5&type=chunk) - Container volume declined approximately **30% year-over-year** in April after tariffs were implemented[5](index=5&type=chunk) - The company expects both container volume and average freight rates to be lower year-over-year for Q2 and the full year 2025[5](index=5&type=chunk) [Guam Service](index=2&type=section&id=Guam%20Service) Guam's container volume decreased 14.3% in Q1 2025 due to lower retail and food/beverage demand, with full-year volume expected to approach 2024 levels - Q1 2025 volume decreased **14.3% YoY** due to lower demand in retail and food/beverage[6](index=6&type=chunk) - Full-year 2025 volume is expected to approach the level achieved in 2024[6](index=6&type=chunk) [Alaska Service](index=2&type=section&id=Alaska%20Service) Alaska's container volume increased 4.8% in Q1 2025 due to higher northbound volume, with full-year volume expected to be comparable to 2024 - Q1 2025 volume increased **4.8% YoY**, mainly from higher northbound volume[7](index=7&type=chunk) - Full-year 2025 volume is expected to be comparable to 2024[7](index=7&type=chunk) [SSAT Joint Venture](index=2&type=section&id=SSAT%20Joint%20Venture) SSAT joint venture contribution increased significantly to $6.6 million in Q1 2025 due to higher lift volume, but is expected to be lower for full-year 2025 - Q1 2025 contribution was **$6.6 million**, a **$6.2 million increase** from Q1 2024, driven by higher lift volume[8](index=8&type=chunk)[19](index=19&type=chunk) - For the full year 2025, the contribution from SSAT is expected to be lower than the **$17.4 million** achieved in 2024[8](index=8&type=chunk) [Logistics](index=2&type=section&id=Logistics) Logistics segment operating income decreased 8.6% in Q1 2025 due to lower freight forwarding and brokerage contributions, with lower Q2 and full-year income anticipated Logistics Performance | Metric (Q1 2025 vs Q1 2024) | Q1 2025 | Q1 2024 | Change | | :--- | :--- | :--- | :--- | | Revenue | $144.6M | $143.1M | +1.0% | | Operating Income | $8.5M | $9.3M | -8.6% | - The decrease in operating income was mainly due to lower contributions from freight forwarding and transportation brokerage, partially offset by a higher contribution from supply chain management[21](index=21&type=chunk) - For the full year 2025, Logistics operating income is expected to be lower than the prior year due to a challenging environment for all business lines[10](index=10&type=chunk) [Full Year 2025 Financial Outlook](index=2&type=section&id=Full%20Year%202025%20Financial%20Outlook) The company projects lower full-year 2025 consolidated operating income due to market uncertainties, providing guidance for key financial metrics and substantial capital expenditures [Consolidated Outlook & Guidance](index=2&type=section&id=Consolidated%20Outlook) Full-year 2025 consolidated operating income is expected to be lower than 2024 due to market uncertainties, with specific guidance provided for depreciation, interest, other income, and effective tax rate - Full-year 2025 consolidated operating income is expected to be lower than the **$551.3 million** achieved in 2024[11](index=11&type=chunk) Full Year 2025 Guidance | Full Year 2025 Guidance | Amount (Approx.) | | :--- | :--- | | Depreciation & Amortization | $200 million | | Interest Income | $31 million | | Interest Expense | $7 million | | Other Income | $9 million | | Effective Tax Rate | 23.0% | [Capital & Dry-docking Expenditures](index=3&type=section&id=Capital%20and%20Vessel%20Dry-docking%20Expenditures) The company made significant Q1 2025 capital investments, projecting substantial full-year expenditures including $305 million for new vessel construction and $100-120 million for other capital needs Capital and Dry-docking Expenditures | Expenditure Type | Q1 2025 Payments | Full Year 2025 Expectation | | :--- | :--- | :--- | | Other Capital Expenditures | $22.5M | $100M - $120M | | New Vessel Construction | $66.7M | ~$305M | | Dry-docking Payments | $10.4M | ~$40M | [Liquidity and Capital Allocation](index=5&type=section&id=Liquidity%2C%20Cash%20Flows%20and%20Capital%20Allocation) The company's cash and cash equivalents decreased in Q1 2025 despite increased operating cash flow, while continuing its capital return program through share repurchases and dividends [Liquidity and Cash Flow](index=5&type=section&id=Liquidity%20and%20Cash%20Flow) Cash and cash equivalents decreased to $122.0 million in Q1 2025, despite net cash from operating activities significantly increasing to $89.0 million, while total debt slightly decreased - Cash and Cash Equivalents decreased by **$144.8 million** during Q1 2025 to **$122.0 million**[22](index=22&type=chunk) - Net cash from operating activities was **$89.0 million** for Q1 2025, compared to **$36.6 million** for Q1 2024[22](index=22&type=chunk) - Total debt decreased by **$10.1 million** to **$390.8 million** as of March 31, 2025[22](index=22&type=chunk) [Capital Return](index=5&type=section&id=Capital%20Return) Matson continued its capital return program in Q1 2025 by repurchasing approximately 0.5 million shares for $69.2 million and declaring a $0.34 per share quarterly cash dividend - Repurchased approximately **0.5 million shares** for a total cost of **$69.2 million** in Q1 2025[23](index=23&type=chunk) - Declared a cash dividend of **$0.34 per share**, payable on June 5, 2025[23](index=23&type=chunk) [Consolidated Financial Statements](index=8&type=section&id=Consolidated%20Financial%20Statements) The consolidated financial statements for Q1 2025 show significant increases in revenue, operating income, and net income, alongside changes in balance sheet items and cash flow activities, with a notable rise in EBITDA [Condensed Consolidated Statements of Income](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Income) Matson reported total operating revenue of $782.0 million in Q1 2025, leading to a significant increase in net income to $72.3 million, or $2.18 per diluted share Condensed Consolidated Statements of Income | (In millions, except per share) | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Total Operating Revenue | $782.0 | $722.1 | | Operating Income | $82.1 | $36.9 | | Income before Taxes | $92.2 | $45.3 | | **Net Income** | **$72.3** | **$36.1** | | **Diluted Earnings Per Share** | **$2.18** | **$1.04** | [Condensed Consolidated Balance Sheets](index=9&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of March 31, 2025, total assets slightly decreased to $4.53 billion, primarily due to reduced cash and cash equivalents, while total liabilities also decreased and shareholders' equity remained stable Condensed Consolidated Balance Sheets | (In millions) | March 31, 2025 | Dec 31, 2024 | | :--- | :--- | :--- | | **Total Assets** | **$4,527.0** | **$4,595.4** | | Cash and cash equivalents | $122.0 | $266.8 | | Property and equipment, net | $2,314.0 | $2,260.9 | | Capital Construction Fund | $685.4 | $642.6 | | **Total Liabilities** | **$1,893.8** | **$1,943.4** | | **Total Shareholders' Equity** | **$2,633.2** | **$2,652.0** | [Condensed Consolidated Statements of Cash Flows](index=10&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Net cash from operating activities significantly increased to $89.0 million in Q1 2025, while investing and financing activities led to a net cash decrease of $144.8 million Condensed Consolidated Statements of Cash Flows | (In millions) | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $89.0 | $36.6 | | Net cash used in investing activities | ($129.4) | ($59.0) | | Net cash used in financing activities | ($104.4) | ($85.7) | | **Net Decrease in Cash** | **($144.8)** | **($108.1)** | [Non-GAAP Reconciliation (EBITDA)](index=11&type=section&id=Net%20Income%20to%20EBITDA%20Reconciliations) The company's non-GAAP EBITDA significantly increased to $131.7 million in Q1 2025, up $48.9 million from Q1 2024, reflecting strong underlying operational performance Net Income to EBITDA Reconciliations | (In millions) | Q1 2025 | Q1 2024 | Change | | :--- | :--- | :--- | :--- | | Net Income | $72.3 | $36.1 | $36.2 | | Adjustments (Taxes, Interest, D&A) | $59.4 | $46.7 | $12.7 | | **EBITDA** | **$131.7** | **$82.8** | **$48.9** |

Q1 2025 Performance - Consolidated operating income significantly increased year-over-year, driven primarily by the China service due to elevated freight rates from Q4 2024 and healthy demand[7] - Hawaii container volume increased by 32% year-over-year due to a competitor's vessel dry-docking[8] - Alaska container volume increased by 48% year-over-year, driven by higher northbound volume[41] - Guam container volume decreased by 143% year-over-year due to lower demand from retail and food and beverage segments[34] - Matson Logistics operating income decreased by approximately $08 million year-over-year to $85 million, due to lower contribution from freight forwarding and transportation brokerage[54] - SSAT joint venture contributed $66 million, a year-over-year increase of $62 million, primarily due to higher lift volume[48] - Net income was $723 million, a 1003% increase compared to $361 million in the first quarter of 2024[55] - Approximately 05 million shares were repurchased for a total cost of $692 million in Q1 2025[61] Outlook - The company is lowering its 2025 outlook due to uncertainty in the market regarding tariffs, global trade, regulatory measures, the U S economy, and geopolitical factors[7] - The company expects full year 2025 container volume in Hawaii to be comparable to the level achieved last year[12] - The company expects full year 2025 container volume in Guam to approach the level achieved last year[35] - The company expects full year 2025 container volume in Alaska to be comparable to the level achieved last year[42] - The company expects the contribution from SSAT to be lower than the $174 million achieved last year, excluding the $184 million impairment charge in Q4 2024[44] - The company expects Logistics operating income to be lower than the level achieved last year due to a challenging environment for all business lines[50] - The company expects approximately $225 million in milestone payments during the balance of 2025 from the Capital Construction Fund (CCF)[69]

Core Insights - Matson, Inc. announced the retirement of Rusty Rolfe, Executive Vice President and President of Matson Logistics, effective July 1, 2025, after 24 years of leadership in transforming Matson Logistics into a recognized provider of integrated logistics services [1][2] - Jerome Holland, currently Vice President of Strategic Planning and Business Development at Matson Logistics, will succeed Rolfe, ensuring a seamless transition [2][3] Company Overview - Matson, founded in 1882, is a leading provider of ocean transportation and logistics services, serving non-contiguous economies such as Hawaii, Alaska, and Guam, as well as other island economies in Micronesia [5] - The company operates a fleet that includes containerships and roll-on/roll-off ships, and Matson Logistics extends its transportation network throughout North America and Asia with asset-light logistics services [5]

Core Viewpoint - Matson (MATX) has received an upgrade to a Zacks Rank 2 (Buy) due to an upward trend in earnings estimates, which is a significant factor influencing stock prices [1][3]. Earnings Estimates and Stock Price Movement - The Zacks rating system is based on changes in earnings estimates, which are closely correlated with near-term stock price movements [4][6]. - Institutional investors utilize earnings estimates to determine the fair value of stocks, leading to buying or selling actions that affect stock prices [4]. Company Performance and Outlook - The upgrade indicates a positive outlook for Matson's earnings, suggesting potential buying pressure and an increase in stock price [3][5]. - Matson is projected to earn $11.82 per share for the fiscal year ending December 2025, reflecting a year-over-year decline of 15.2%. However, the Zacks Consensus Estimate has increased by 20.7% over the past three months [8]. Zacks Rank System - The Zacks Rank system classifies stocks into five groups based on earnings estimates, with a strong historical performance, particularly for Zacks Rank 1 stocks, which have averaged a +25% annual return since 1988 [7]. - Matson's upgrade to Zacks Rank 2 places it in the top 20% of Zacks-covered stocks, indicating a strong potential for market-beating returns in the near term [10].

Core Viewpoint - The stock price of Matson (MATX) has been on a bearish trend, losing 6.7% in the past two weeks, but recent technical indicators suggest a potential trend reversal due to increased buying interest and positive earnings outlook from analysts [1][2]. Technical Analysis - The formation of a hammer chart pattern indicates a possible bottoming out, suggesting that selling pressure may be exhausting and that bulls could be gaining control [2][4]. - A hammer pattern typically forms during a downtrend when the stock opens lower, makes a new low, but then closes near or above the opening price, signaling a potential reversal [3][4]. - Hammer candles can appear on various timeframes and are utilized by both short-term and long-term investors [4]. Fundamental Analysis - Recent upward revisions in earnings estimates for MATX serve as a bullish indicator, correlating strongly with near-term stock price movements [6]. - Over the last 30 days, the consensus EPS estimate for MATX has increased by 15.8%, indicating that analysts expect better earnings than previously predicted [7]. - MATX holds a Zacks Rank of 1 (Strong Buy), placing it in the top 5% of over 4,000 ranked stocks, which typically outperform the market [8].