MATX Q1 Earnings Call: Matson Cites Tariff Uncertainty and Shifting Asia-Pacific Trade as Key Themes

Maritime transportation company Matson (NYSE:MATX) fell short of the market’s revenue expectations in Q1 CY2025, but sales rose 8.3% year on year to $782 million. Its non-GAAP profit of $2.18 per share was 3.8% below analysts’ consensus estimates.

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StockStory’s Take

Matson’s first quarter results reflected the impact of shifting global trade dynamics and new tariff measures. CEO Matt Cox cited elevated freight rates from late 2024 in the China service and increased container volumes in Hawaii and Alaska as key drivers of year-over-year profit growth. However, logistics operating income declined, and management acknowledged headwinds from lower volumes out of Guam and ongoing softness in freight forwarding.

Looking forward, Matson’s leadership expressed caution, lowering their outlook for 2025 amid pronounced uncertainty around tariffs, regulatory actions, and the broader macroeconomic environment. Cox explained, “We are lowering our 2025 outlook due to the significant uncertainty regarding tariffs and global trade, regulatory measures, the trajectory of the U.S. economy and other geopolitical factors.” Management highlighted ongoing efforts to diversify trade lanes in Asia and optimize cost structure while maintaining a focus on operational agility.

Key Insights from Management’s Remarks

Matson’s management emphasized the operational and market trends shaping the first quarter, particularly around trade flows and their response to tariff changes. They detailed how elevated freight rates and increased Hawaii and Alaska volumes drove results, while also highlighting the company’s approach to evolving Asia-Pacific supply chains.

• China trade volatility: Elevated freight rates carried over from late 2024 supported first quarter profits, but newly implemented tariffs led to a 30% drop in container volumes out of China since April, with management uncertain if this is temporary or persistent.
• Asia diversification strategy: Matson expanded direct service from Vietnam (Ho Chi Minh), capitalizing on the “China Plus One” trend as customers diversify manufacturing to Southeast Asia. Management stated that about 20% of current trans-Pacific volume now originates in Vietnam.
• Hawaii and Alaska volume gains: Hawaii container volume grew due to a competitor’s vessel dry docking, and Alaska volumes increased from higher northbound shipments. Both markets benefited from stable local economies and continued construction activity.
• Cost containment actions: Management imposed a headcount freeze, deferred capital spending, and curtailed discretionary expenses to preserve flexibility amid uncertainty, while preparing for a potential demand rebound if trade conditions normalize.
• E-commerce logistics opportunity: The recent removal of the de minimis exemption (which previously allowed low-value goods to enter the U.S. duty-free) is expected to boost ocean freight demand, as e-commerce players shift more cargo from air to ocean shipping.

Drivers of Future Performance

Management’s outlook for the remainder of the year centers on the unpredictable impact of tariffs, shifting supply chains in Asia, and Matson’s ability to adapt its service mix and cost structure.

• Tariff-driven volume risk: Ongoing uncertainty about U.S.-China tariffs is expected to pressure both volumes and freight rates for Matson’s China trade lane, with the potential for further declines if trade tensions escalate.
• Expansion in Southeast Asia: Growth in Vietnam-originating shipments may partially offset China weakness. Matson’s expanded feeder network positions it to capture demand as more customers adopt a “China Plus One” sourcing strategy.
• Operational flexibility: Management’s cost controls and capacity discipline are designed to maintain profitability during downturns, while ensuring readiness to scale up service if demand recovers rapidly.

Top Analyst Questions

• Daniel Imbro (Stephens): Asked about Matson’s capacity for scaling Vietnam shipments and whether the new Ho Chi Minh service could offset China declines. Cox explained Vietnam now accounts for 20% of volume and Matson can increase capacity if customer demand grows, but noted infrastructure and labor constraints in Vietnam.
• Jacob Lacks (Wolfe Research): Questioned whether Matson would consider canceling China sailings. Cox stated Matson’s brand is built on reliable, unbroken service and they aim to avoid blank sailings, anticipating a possible cargo rebound as inventories run down.
• Omar Nokta (Jefferies): Inquired if ending the de minimis exemption would create lasting opportunities to capture e-commerce volumes from airfreight. Cox agreed that the change should permanently expand ocean demand for e-commerce shipments.
• Ben Nolan (Stifel): Asked about cost mitigation measures and whether further actions are planned. Cox pointed to deferred capital spending and a hiring freeze, saying Matson is prepared to act further if needed but wants to preserve flexibility for a potential demand recovery.
• Ben Nolan (Stifel): Also pressed for context on the 30% China volume drop’s effect on operating income. CFO Joel Wine advised analysts to use last year’s Q2 results and adjust for the volume decline to estimate the impact, but refrained from giving specific guidance.

Catalysts in Upcoming Quarters

In the coming quarters, our analysts will focus on (1) how effectively Matson can scale its Southeast Asia service network to offset China-related volume declines, (2) the impact of ongoing tariff negotiations and regulatory changes on trans-Pacific trade flows, and (3) management’s ability to balance cost controls with readiness to seize opportunities in a volatile shipping environment. Shifts in e-commerce logistics and inventory restocking patterns will also be closely monitored as potential demand drivers.

Matson currently trades at a forward P/E ratio of 11.5×. Should you load up, cash out, or stay put? The answer lies in our free research report.

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