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Why Matson, Inc. Stock Rocketed 40% on July 10

By Reuben Gregg Brewer – Jul 10, 2020 at 3:13PM

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The transportation provider gave an update that got investors excited about the future.

What happened

Transportation services provider Matson, Inc. (MATX 0.25%) rose a dramatic 40% on July 10. Although by roughly 2:30 p.m. EDT the stock had given back some of that gain, it was still up an impressive 34% for the day. The big price bounce was related to an announcement made after the market closed on July 9.  

So what

There's nothing fancy here; Matson provided a guidance update for its second quarter that was fairly upbeat. For starters, it stated that operating income in its ocean transportation division would be roughly double what it was in the year-ago period. The number would also be nearly five-times larger than it was in the first quarter. The company also announced that operating income in its logistics division would be down year over year, but up sequentially from the first quarter. Not as positive, but perhaps not as bad as it could have been.  

A container ship at sea

Image source: Getty Images.

The most important information in the release, however, was likely CEO Matt Cox's comments. For example, Cox noted that:

Overall, our performance in the second quarter was led primarily by the strength in our China service, including chartered voyages in addition to our normal weekly vessels that sailed at capacity. Compared with our expectations in early May at the time of our last earnings call, we also had better-than-expected volume in our Hawaii trade lane as we carried a portion of Pasha's volume due in part to the dry-docking of one of its vessels, and we had better-than-expected volume in our Alaska trade lane as the local economy gradually reopened, creating improved freight demand.

There's a lot of ground covered there, but the big picture is that the company's business appears to be doing pretty well as the global economy starts to rebound from COVID-19-related closures. That, in turn, bodes well for the future.  

Now what

To suggest that Cox's one-day stock price gain was impressive would be an understatement. Part of the reason is the improvement in the business' operating performance, but the other part is tied to the company's balance sheet. With the debt-to-equity ratio at a notable 1.15 times at the end of the first quarter and debt-to-EBITDA at 3 times, leverage has been an issue. Better operating results help to reduce that concern. This probably isn't a good choice for conservative long-term investors, but it does look like Matson's business outlook is much better than feared just a few months ago.   

Reuben Gregg Brewer has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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