Matson (MATX) Q3 2014 earnings summary

Executive summary

• Strong Q3 performance reflected higher Hawaii volume and freight yields, improved fuel surcharge recoveries, SSAT’s turnaround, and logistics gains.

• Q4 operating income expected above prior-year levels, excluding the $9.95 million Q4 2013 litigation charge; growth anticipated across ocean transportation and logistics.

Financial highlights

• Q3 consolidated operating income was $45 million vs. $27 million in Q3 2013; revenue rose 6.5% YoY and operating costs rose 2.9%.

• Q3 EBITDA was $62.2 million and EPS increased 25% YoY; approximately $6 million of unfavorable Q3 2013 items accounted for roughly one-third of the EBITDA increase.

• Q3 net income rose 25%, reflecting operating gains and the absence of prior-year unfavorable items, partly offset by higher interest expense and a higher effective tax rate.

• 9M consolidated operating income was $90.6 million, up $8.2 million YoY; excluding prior-year unfavorable items, ocean transportation operating income was essentially flat.

Outlook and guidance

• Q4 ocean transportation operating income expected above Q4 2013’s $26 million, excluding litigation; drivers include modest Hawaii and Guam growth, higher China volume and rates, and modest SSAT profit.

• Q4 logistics operating income expected to modestly exceed Q4 2013’s $1.9 million, supported by volume growth, expense control, and warehouse improvements.

• Hawaii volume expected to modestly exceed Q4 2013; a nine-ship fleet is planned for Q4, with utilization near 95% or slightly higher.

• China vessels expected to operate essentially full, with average freight rates above Q4 2013 levels; logistics operating income for the balance of 2014 expected slightly above 2013.

• FY2014 effective tax rate expected near 43%, above the normal ~38%; Q4 rate expected to normalize.