Maritime transportation company Matson (NYSE:MATX) reported Q4 CY2024 results exceeding the market’s revenue expectations, with sales up 12.9% year on year to $890.3 million. Its GAAP profit of $3.80 per share was 18.7% above analysts’ consensus estimates.
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Matson (MATX) Q4 CY2024 Highlights:
- Revenue: $890.3 million vs analyst estimates of $851.8 million (12.9% year-on-year growth, 4.5% beat)
- EPS (GAAP): $3.80 vs analyst estimates of $3.20 (18.7% beat)
- Adjusted EBITDA: $195.2 million vs analyst estimates of $175.2 million (21.9% margin, 11.4% beat)
- Operating Margin: 16.6%, up from 9.5% in the same quarter last year
- Free Cash Flow Margin: 5.5%, similar to the same quarter last year
- Market Capitalization: $4.76 billion
Company Overview
Founded by a Swedish orphan, Matson (NYSE:MATX) is a provider of ocean transportation and logistics services.
Marine Transportation
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.
Sales Growth
A company’s long-term sales performance is one signal of its overall quality. Even a bad business can shine for one or two quarters, but a top-tier one grows for years. Thankfully, Matson’s 9.2% annualized revenue growth over the last five years was solid. Its growth beat the average industrials company and shows its offerings resonate with customers.
We at StockStory place the most emphasis on long-term growth, but within industrials, a half-decade historical view may miss cycles, industry trends, or a company capitalizing on catalysts such as a new contract win or a successful product line. Matson’s recent history marks a sharp pivot from its five-year trend as its revenue has shown annualized declines of 11.2% over the last two years. Matson isn’t alone in its struggles as the Marine Transportation industry experienced a cyclical downturn, with many similar businesses observing lower sales at this time. 
This quarter, Matson reported year-on-year revenue growth of 12.9%, and its $890.3 million of revenue exceeded Wall Street’s estimates by 4.5%.
Looking ahead, sell-side analysts expect revenue to decline by 3.3% over the next 12 months. Although this projection is better than its two-year trend, it's hard to get excited about a company that is struggling with demand.
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Operating Margin
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 21.6%. This result was particularly impressive because of its low gross margin, which is mostly a factor of what it sells and takes huge shifts to move meaningfully. Companies have more control over their operating margins, and it’s a show of well-managed operations if they’re high when gross margins are low.
Analyzing the trend in its profitability, Matson’s operating margin rose by 4.4 percentage points over the last five years, as its sales growth gave it operating leverage.
This quarter, Matson generated an operating profit margin of 16.6%, up 7 percentage points year on year. The increase was driven by stronger leverage on its cost of sales (not higher efficiency with its operating expenses), as indicated by its larger rise in gross margin.
Earnings Per Share
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 49% compounded annual growth rate over the last five years, higher than its 9.2% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.
Diving into Matson’s quality of earnings can give us a better understanding of its performance. As we mentioned earlier, Matson’s operating margin expanded by 4.4 percentage points over the last five years. On top of that, its share count shrank by 22.4%. These are positive signs for shareholders because improving profitability and share buybacks turbocharge EPS growth relative to revenue growth. 
Like with revenue, we analyze EPS over a more recent period because it can provide insight into an emerging theme or development for the business.
For Matson, its two-year annual EPS declines of 27.5% mark a reversal from its (seemingly) healthy five-year trend. We hope Matson can return to earnings growth in the future.
In Q4, Matson reported EPS at $3.80, up from $1.78 in the same quarter last year. This print easily cleared analysts’ estimates, and shareholders should be content with the results. Over the next 12 months, Wall Street expects Matson’s full-year EPS of $14.04 to shrink by 27.2%.
Key Takeaways from Matson’s Q4 Results
We were impressed by how significantly Matson blew past analysts’ EBITDA expectations this quarter. We were also excited its revenue outperformed Wall Street’s estimates by a wide margin. Zooming out, we think this was a solid quarter. The stock traded up 1.9% to $144.09 immediately after reporting.
Matson may have had a good quarter, but does that mean you should invest right now? We think that the latest quarter is only one piece of the longer-term business quality puzzle. Quality, when combined with valuation, can help determine if the stock is a buy. We cover that in our actionable full research report which you can read here, it’s free.