China service pushes Matson earnings past expectations in ‘very strong’ fourth quarter

Matson reported better-than-expected fourth-quarter earnings as the US container ship operator rode the strength of its China services.

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The New York-listed company said it expects the strong freight rate environment to continue into the current first quarter, but how long that will continue depends on the Red Sea.

The Hawaii liner operator and shipowner logged $128m in net profit for the final three months of 2024, more than doubling the $62.4m earned a year earlier.

Its $3.80 in earnings per share was significantly higher than the $3.20 average estimate by two analysts polled by Yahoo Finance.

The figure was also better than Matson’s own predictions, according to chief executive Matt Cox.

“For the quarter, our China service was the primary driver of the year-over-year increase in ocean transportation and consolidated operating income,” he said in the earnings report.

Seasonally stronger

“We saw seasonally stronger freight demand with significantly higher year-over-year freight rates for our industry-leading CLX [China-Long Beach Express] and MAX [Matson Asia Express] services.”

Matson reported consolidated revenue of $890m, an increase from $789m for the last three months of 2023. Costs and expenses grew to $743m from $712m.

For the core ocean transportation business, operating income jumped to $137m, a 107% gain from $66.4m in the fourth quarter of 2023.

The strong report continues a trend that started in the middle of the second quarter, as freight rates were propped up by a resilient US economy and resilient consumer demand, Matson said.

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The quarterly results lifted full-year net income to $476m, up from $297m in 2023.

“Looking ahead, we expect elevated freight rates in our China service to continue into the first quarter of 2025,” Cox said, noting that operating income could be “meaningfully higher” during the period compared to the same three months of last year.

“Beyond the first quarter, our China service rates will largely be driven by the timing of trade flow normalisation in the Red Sea, other geopolitical factors, supply chain activity and the trajectory of the US economy.”

If the ceasefire holds in the Middle East and Red Sea traffic normalises, that could lead to moderating freight rates on the China service, the chief executive said. That would lead to “moderately” lower operating income for 2025.

Red Sea rise?

Continued problems in the Middle East could change that scenario.

“If the Red Sea remains disrupted through year-end, we expect our freight rates in China to remain elevated throughout the year,” Cox said.

In that situation, he said the next full-year operating income is expected to approach 2024’s levels.(Copyright)