Matson (MATX)

Maritime transportation company Matson (NYSE:MATX) announced better-than-expected revenue in Q3 CY2025, but sales fell by 8.5% year on year to $880.1 million. Its GAAP profit of $4.24 per share was 30.3% above analysts’ consensus estimates.

Company Overview

Founded by a Swedish orphan, Matson (NYSE:MATX) is a provider of ocean transportation and logistics services.

The growth of e-commerce and global trade continues to drive demand for shipping services, presenting opportunities for marine transportation companies. While ocean freight is more fuel efficient and therefore cheaper than its air and ground counterparts, it results in slower delivery times, presenting a trade off. To improve transit speeds, the industry continues to invest in digitization to optimize fleets and routes. However, marine transportation companies are still at the whim of economic cycles. Consumer spending, for example, can greatly impact the demand for these companies’ offerings while fuel costs can influence profit margins. Geopolitical tensions can also affect access to trade routes, and if certain countries are banned from using passageways like the Panama Canal, costs can spiral out of control.

Competitors in the maritime transportation industry include Kirby Corporation (NYSE:KEX), ZIM Integrated Shipping Services (NYSE:ZIM), Danaos Corporation (NYSE:DAC).

A company’s long-term sales performance can indicate its overall quality. Any business can experience short-term success, but top-performing ones enjoy sustained growth for years. Thankfully, Matson’s 8.8% annualized revenue growth over the last five years was decent. Its growth was slightly above the average industrials company and shows its offerings resonate with customers.

Long-term growth is the most important, but within industrials, a half-decade historical view may miss new industry trends or demand cycles. Matson’s recent performance shows its demand has slowed as its annualized revenue growth of 4.3% over the last two years was below its five-year trend. We also note many other Marine Transportation businesses have faced declining sales because of cyclical headwinds. While Matson grew slower than we’d like, it did do better than its peers.

This quarter, Matson’s revenue fell by 8.5% year on year to $880.1 million but beat Wall Street’s estimates by 5.1%.

Looking ahead, sell-side analysts expect revenue to decline by 6.9% over the next 12 months, a deceleration versus the last two years. This projection doesn't excite us and implies its products and services will see some demand headwinds.

At StockStory, we prefer high gross margin businesses because they indicate the company has pricing power or differentiated products, giving it a chance to generate higher operating profits.

Matson’s gross margin is good compared to other industrials businesses and signals it sells differentiated products, not commodities. As you can see below, it averaged an impressive 35.7% gross margin over the last five years. That means for every $100 in revenue, roughly $35.70 was left to spend on selling, marketing, R&D, and general administrative overhead.

Matson produced a 175% gross profit margin in Q3, marking a 143.1 percentage point increase from 32% in the same quarter last year. Matson’s full-year margin has also been trending up over the past 12 months, increasing by 39.4 percentage points. If this move continues, it could suggest an environment where the company has better pricing power and stable or shrinking input costs (such as raw materials).

Matson has been a well-oiled machine over the last five years. It demonstrated elite profitability for an industrials business, boasting an average operating margin of 21%. This result isn’t too surprising as its gross margin gives it a favorable starting point.

Looking at the trend in its profitability, Matson’s operating margin decreased by 8.6 percentage points over the last five years. Many Marine Transportation companies also saw their margins fall (along with revenue, as mentioned above) because the cycle turned in the wrong direction. We hope Matson can emerge from this a stronger company, as the silver lining of a downturn is that market share can be won and efficiencies found.

In Q3, Matson generated an operating margin profit margin of 18.3%, down 6.4 percentage points year on year. Conversely, its gross margin actually rose, so we can assume its recent inefficiencies were driven by increased operating expenses like marketing, R&D, and administrative overhead.

We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

Matson’s EPS grew at an astounding 35.8% compounded annual growth rate over the last five years, higher than its 8.8% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.

We can take a deeper look into Matson’s earnings to better understand the drivers of its performance. A five-year view shows that Matson has repurchased its stock, shrinking its share count by 26.9%. This tells us its EPS outperformed its revenue not because of increased operational efficiency but financial engineering, as buybacks boost per share earnings.

Like with revenue, we analyze EPS over a shorter period to see if we are missing a change in the business.

For Matson, its two-year annual EPS growth of 22.9% was lower than its five-year trend. We still think its growth was good and hope it can accelerate in the future.

In Q3, Matson reported EPS of $4.24, down from $5.89 in the same quarter last year. Despite falling year on year, this print easily cleared analysts’ estimates. Over the next 12 months, Wall Street expects Matson’s full-year EPS of $13.14 to shrink by 22.5%.

If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.

Matson has shown terrific cash profitability, putting it in an advantageous position to invest in new products, return capital to investors, and consolidate the market during industry downturns. The company’s free cash flow margin was among the best in the industrials sector, averaging 15.2% over the last five years.

Taking a step back, we can see that Matson’s margin dropped by 4.2 percentage points during that time. Continued declines could signal it is in the middle of an investment cycle.

Matson’s free cash flow clocked in at $234.1 million in Q3, equivalent to a 26.6% margin. This result was good as its margin was 7 percentage points higher than in the same quarter last year, but we wouldn’t read too much into the short term because investment needs can be seasonal, leading to temporary swings. Long-term trends trump fluctuations.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? Enter ROIC, a metric showing how much operating profit a company generates relative to the money it has raised (debt and equity).

Although Matson hasn’t been the highest-quality company lately, it found a few growth initiatives in the past that worked out wonderfully. Its five-year average ROIC was 26%, splendid for an industrials business.

We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. Unfortunately, Matson’s ROIC has decreased significantly over the last few years. We like what management has done in the past, but its declining returns are perhaps a symptom of fewer profitable growth opportunities.

Matson reported $92.7 million of cash and $361.2 million of debt on its balance sheet in the most recent quarter. As investors in high-quality companies, we primarily focus on two things: 1) that a company’s debt level isn’t too high and 2) that its interest payments are not excessively burdening the business.

With $702.8 million of EBITDA over the last 12 months, we view Matson’s 0.4× net-debt-to-EBITDA ratio as safe. We also see its $17.1 million of annual interest expenses as appropriate. The company’s profits give it plenty of breathing room, allowing it to continue investing in growth initiatives.

It was good to see Matson beat analysts’ EPS expectations this quarter. We were also excited its EBITDA outperformed Wall Street’s estimates by a wide margin. Zooming out, we think this was a solid print. The stock remained flat at $98.27 immediately following the results.

Updated: December 3, 2025 at 10:26 PM EST

The latest quarterly earnings matters, sure, but we actually think longer-term fundamentals and valuation matter more. Investors should consider all these pieces before deciding whether or not to invest in Matson.

Matson isn’t a terrible business, but it doesn’t pass our bar. Although its revenue growth was good over the last five years, it’s expected to deteriorate over the next 12 months and its diminishing returns show management's prior bets haven't worked out. And while the company’s impressive operating margins show it has a highly efficient business model, the downside is its projected EPS for the next year is lacking.

Matson’s P/E ratio based on the next 12 months is 10x. This valuation multiple is fair, but we don’t have much faith in the company. We're pretty confident there are more exciting stocks to buy at the moment.

Wall Street analysts have a consensus one-year price target of $144 on the company (compared to the current share price of $114.16).

Although the price target is bullish, readers should exercise caution because analysts tend to be overly optimistic. The firms they work for, often big banks, have relationships with companies that extend into fundraising, M&A advisory, and other rewarding business lines. As a result, they typically hesitate to say bad things for fear they will lose out. We at StockStory do not suffer from such conflicts of interest, so we’ll always tell it like it is.