Matson, Inc. (MATX) Earnings

Management highlights

• Ocean transportation operating income exceeded expectations in first quarter 2026, mainly due to higher freight demand post-Lunar New Year in China service. • Domestic trade lanes in Hawaii and Alaska had lower year-over-year volume. • Logistics operating income lower year over year due to lower supply chain management contribution. • Iran conflict impacted fuel prices, with expectation of lag in fuel cost recovery in second quarter but full recovery by end of year. • Raised full-year outlook for consolidated operating income due to strengthening freight demand in China service post-Lunar New Year continuing through peak season. • Hawaii's economy expected to have modest growth with construction activity but tourism soft and inflationary pressures. • China service volume lower year over year initially but post-holiday freight demand exceeded expectations with growth in e-commerce, e-goods, garments, air to ocean freight conversions, and feeder network growth. • Guam and Alaska services expected container volume comparable to prior year. • SSAT terminal joint venture contribution expected lower in 2026. • Logistics operating income expected to approach prior year level in full year 2026. • Strong cash flows generated, with cash flow from operations exceeding aggregate spend on maintenance capex, dividends, and share repurchases. • Share repurchase program details, including shares repurchased and new authorization. • Capex projections for 2026 with maintenance and other capital expenditures range unchanged, and new vessel construction milestone payments and related costs. • Focus on putting customers first, maintaining operational excellence, and serving niche markets, with China service differentiated by speed, reliability, and schedule integrity, and e-commerce expected as long-term growth driver. • Disciplined return of capital to shareholders with share repurchase authorization increase.

Guidance

• Expect ocean transportation operating income in second quarter 2026 to be approximately $20 million higher than the second quarter of 2025. • Expect logistics operating income in second quarter 2026 to approach the $14.4 million achieved in the second quarter of 2025. • Full year 2026: Expect ocean transportation operating income to modestly exceed the level achieved in 2025 due to strengthening freight demand in China service post-Lunar New Year continuing through peak season. Expect logistics operating income to approach the level achieved in 2025. Expect to recover fuel costs by end of year with most recovery in third quarter. Expect more normal operating seasonality pattern with second and third quarters being strongest. Depreciation and amortization to approximate $210 million, inclusive of approximately $35 million for dry docking amortization. Interest income to be approximately $16 million, interest expense to be approximately $6 million, other income to be approximately $7 million, effective tax rate of approximately 21%, and dry docking payments of approximately $45 million. Maintenance and other capital expenditures range unchanged at $150 to $170 million for full year 2026. Estimate for expected new vessel construction milestone payments and related costs for full year 2026 is $400 million.

Segment performance

In the first quarter 2026, ocean transportation operating income exceeded expectations due to higher freight demand post-Lunar New Year in China service. Domestic trade lanes saw lower volume in Hawaii and Alaska. Logistics operating income was lower year over year due to lower supply chain management contribution. Hawaii service container volume decreased 5.6% year over year; China service volume was 9.5% lower year over year. Guam service volume was flat year over year. Alaska service volume decreased 2% year over year. SSAT terminal joint venture contributed $5 million, a $1.6 million decrease year over year. Logistics operating income was $6.8 million, $1.7 million lower than the prior year.

Risks & headwinds

• Geopolitical tension and uncertainty, including the Iran conflict which impacted fuel prices and may have potential impacts on operating performance and service levels if not managed properly. • Volatility in fuel prices with timing lag between incurring fuel costs and fully recovering through fuel surcharge, which could impact near-term earnings if not effectively managed. • Tariff uncertainties and potential reenactment or other shocks to the system that could impact consumer demand and trade relationships, affecting the China service and overall business performance. • Competition in the ocean trades, including potential actions by other carriers that could impact market share and operating income. • Economic conditions in various markets such as Hawaii, Alaska, and Guam, including soft tourism and inflationary pressures in Hawaii, which could impact volume and operating income. • Uncertainties related to customer hesitancy and changes in trade patterns in the China service, which could affect volume and demand.

Analyst Q&A

• Q: Hey, Matt. Hey, Joel. Thanks for your time. So you mentioned that you expect demand strength to continue through peak season. Last year was a little bit unique with the max service below 100% utilization during peak. Do you think you can get back towards more full shifts this year as we move into 3Q?

  A: Yeah, I do, Jake. I think we said at the beginning of the year, and we continue to see it as it's unfolding in front of us, a more traditional cycle in the China trades, meaning a post-Lunar New Year slow build to the second and third quarter, full or nearly full ships as we have traditionally, whether we a week and we have vessels that are slightly different sizes, but we expect to be full or nearly full in the second and third quarter as we build into the traditional peak season. So when we expect it to remain busy until, you know, the traditional first second week of October pattern in the Lunar New Year. So, yeah, we're feeling like we're in a more normal environment and perhaps a bit slower post Lunar New Year, but that's kind of the way we're seeing the world today. But overall, you know, we expect to end up above where we did last year. And now we're at a point where we're feeling like we're going to exceed last year's marks.

• Q: And when I look at sort of air freight versus ocean freight, air tends to be a lot more fuel intensive. Are you seeing more shippers look to convert freight to your service just the longer this high fuel price environment persists? And to the extent we start seeing some jet fuel shortages in Asia, did that accelerate volume growth from some of the non-China geographies?

  A: Yeah, I think you're right. So I think what we have heard from our customers is, although we have been mentioning this air freight conversion for the last couple of years, given this expedited space that we created, there's been sort of a long term. There are periods in markets where that growth trend would go up or go down, and we think we're entering a period where we're going to see more air freight conversions, some of which will be temporary and some of which will continue to convert. I also think that the longer that energy prices and availability are issues, I think the air freight markets have been significantly dislocated, and especially in places where they primarily import their jet fuel. So while we haven't seen significant impacts yet, we are seeing both from a price standpoint and a potential availability, we're seeing a lot of passenger airlines cancel flights or cancel marginally profitable flights. That's happening all over the world, including in the US, although that's not our core market. Just a reminder that 50% of the air freight flies in the bellies of passenger planes. So we think we see it as not a is as a tailwind um and rather than a you know a huge catalyst um our ships will are likely to be in a more traditional peak cycle nearly full so i i think it'll be helpful in the tailwind.

• Q: Maybe last one for me um can you give us a sense how much the fuel lag headwind you're expecting in the second quarter is i know it's volatile but you know uh any quantitative uh like just a number around that would be helpful and then Oh, go ahead. Did you have a second part of that question? Yeah. Just as you get into 3Q, could you even over-recover just given the investments you've made in scrubbers and LNG, or is this really a true pass-through?

  A: Yeah. Okay. So let me get to your first question first. I think the way we're thinking about it in terms of providing more visibility to our second quarter under collection, we're not exactly sure where we're going to end up. As you say, there's a significant amount of volatility Um, and I think it's not central to our story as we, as we think about it, we remain highly confident in our ability to recover fuel for the year. Um, the first quarter, because of that, it happened late in the quarter and we consume fuel over longer voyages. So there was very little impact. Um, we're thinking that the, you know, the impact will primarily be felt in the second quarter. And we're also highly confident that we're going to be able to recover that in the second half of the year. So there's not a margin erosion story. And I think we've given you our second quarter guide, so that's inclusive of the amounts we're including, but would rather stay away from point-specific items. And then as to your second question on fuel, I'll turn that over to Joel. A: Yeah, so if it's fuel-related items that we'll put in the recovery basket, Jake, so for instance, for a scrubber, which we haven't done recently, but we did many, many years ago, That's a fuel-related item that allows us to really purchase fuel at lower costs. It's part of the overall equation. So if something like that is very specific to our fuel, it's related to fuel, then yes, that goes into our overall recovery basket.

• Q: And our next question comes from the line of Joe Enderle from Stevens Inc. Your question, please. Hey, guys. Thanks for taking the question. You've previously disclosed transshipment mix around 20% of CLX and MAX. Was there any change in that figure in 1Q? And then any regions in particular made you more optimistic on near-term growth?

  A: Yeah, I think that 20% we previously cited, we're in the 20% to 25% range. I think we expect to continue to be in that range as we'll grow both our China origins and our Southeast Asia origins. both as we look towards filling our ships as we get into the more traditional peak season. I think the question really is we do expect our customers to continue to move some of their manufacturing base out of China, although we continue to believe that China will remain an important element of our story and remain an important part of the world productive capability for manufacturing products so I would say could that could we go up from the 20 to 25 percent sure I think it's possible but importantly if it allows us to move with our customers as they look at relocating their plants were a trusted supply chain partner and they have confidence in us and so we'll continue to move as our customers move at that pace.

• Q: That's helpful. And then just as a follow-up, I guess kind of a broader question on the China service. It was a really volatile year last year, a lot of changes in trade. How would you just describe overall hesitancy on China trade as we have moved through the year among customers?

  A: Yeah, I mean, I think for our customers, there are, you know, Tariffs, do those settle down? They're going to be looking at producing their products at a place from an all-in standpoint, including tariffs and transportation charges and all of the things to help them meet their needs for their retailing needs. And so I think there's a lot of factors that go into it, but our view and is embedded in our commentary is that we think while there will be moments where tariff issues pop up, I think in our world we think that Tariff uncertainties are largely behind us. President Xi and President Trump will be meeting in a few weeks. We're optimistic that we're past the period like we had last fall where there was significant uncertainty. That's based into or baked into our thinking about how the rest of the year is going to unfold in that regard.

• Q: And just one more on the competitive backdrop. We touched on expedited air. But then within expedited ocean, how do you shape up the competitive backdrop there? Have你 seen any increase in blank sailings? Or has there been any capacity losses as competitors had less confidence on the trade backdrop with China?

  A: Yeah, so let me make a general comment about the ocean trades perspective. generally, the more generic. And then我'll pivot to your question about what we describe as a second tier expedited carriers, that is that group that are below us or between the general freight markets and our industry leading markets. So on the general generic ocean side, I think we're seeing relatively good utilization of the ocean carriers there are small role pools the ocean carriers themselves are trying to get air freight I'm sorry ocean freight up many of them have very significant increases in their fuel consumption and cost and other cost increases and they're seeking to raise rates in part to recover those costs so I would call the broader generic ocean market as orderly and And I would say the second-tier expedited carriers, we haven't seen any dramatic changes in any of the carriers' capabilities. We haven't seen any significant cancellations of sailings. And so we see that the market for that secondary carrier, there's three or four of them that buy for that space to be relatively similar. And again, not that你asked, but Our belief was and continues to be that if we remain the fastest and second fastest CLX and Mac service, we're going to get the lion's share of this expedited market, and that continues to be true now.

• Q: And our next question comes from the line of Tom Osano from JP Morgan. Your question, please. Hello, everyone. Hi, Tomo. Hi, Tomo. Thank you. So your Q2 ocean transportation operating income guidance is $20 million of up last year. Which services or customer segments are driving this growth, and what are the key risks to achieving it, please?

  A: Okay. Thanks, Tomo. So the primary driver to that increase is really the continued strength in our China trade post-Lunar New Year that we talked about. And so our domestic businesses, we expect to hang in there on a relatively similar basis on a year-over-year basis. So the primary uptick is really the China trade and the demand drivers and some of our core segments that Matt talked about earlier. So e-commerce, e-goods, garments, those sectors really returning to a more normal traditional demand in Q2 compared to last year's Q2, which had a lot of tariff impacts on it. And so the risk, and that speaks to the risk, the risk are that there's a dislocation or there's tariffs reenacted or other kind of shocks to the system. So absent a shock to the system that would impact consumer demand or tariffs and direct trade relationships, we expect it to be a relatively orderly demand-driven second quarter, and that's what I would expect to be up year over year.

• Q: And if you could share some more color on Hawaii and Alaska demand and economic conditions, especially regarding tourism and constructions, energies, and again, like what risk do you see for 2026?

  A: Okay. Thomas, I'll start with Hawaii. So Hawaii, the bright spot is construction. There has been more construction activity. It's been fairly consistent for a year, year and a half, and we see that driving some demand in 2026. But it hasn't been enough to really buoy the economy in a really meaningful, positive way because the other side, the tourism side, has been still very sluggish. So U.S. West Coast tourism and U.S. tourism to Hawaii's been okay, although dollar spend has been not really dramatically growing. But where you really continue to see sluggishness on the tourism side is international tourism, which is still quite a bit off where it was three, four, five years ago. And that's been the biggest overhang on creating lack of growth and GDP growth in the Hawaiian economy. So it's a mixed bag在Hawaii, but overall we still continue to say it's a sluggish environment. In the case of Alaska, moving to that market, um there there's continues to be a significant amount of oil and gas and infrastructure investing around energy that's been very very positive for alaska our volumes have hung in there well we sometimes have year-over-year differentiation based upon competitors dry docking and timing of voyages and things like that but overall the alaska market continues to be steady and hanging in there with upward trajectories our expectation because of investment in oil and gas and and activity happening because of that more disposable income for the residents of Alaska because of that. So those are the general high-level puts and takes in those two key markets. The third market for us, Guam, you didn't ask about that directly, but it's a really important domestic market for us, and that's continued to be steady as well. Tourism is hanging in okay, but again, not on the international side. But we still continue to see a lot of government spending在Guam and the Western Pacific region that's helping the volumes in that region.

• Q: And then lastly, if you could talk about logistics segment operating income decline in Q1, what specific actions are you taking to drive recovery in Q2 and beyond? And what is your outlook for the rest of the year?

  A: Yes. So the outlook for the rest of the year is that we'll be approaching last year's results. And the actions we've been taking is really focusing on two different pieces. Our Alaska, Span Alaska piece is about a little bit over half the logistics side. And there we're continuing just to focus on discipline pricing和delivery for our customers and providing the best transit times and customer service in that market. And then a similar strategy on the brokerage business side, which has been the other piece Our margins have been more compressed and under pressure, both on highway truckload, but also intermodal. And there, we're continuing to really focus on stickier customer relationships, small and medium customers, and having pricing discipline and good execution to deliver for those customers in what's still been generally a soft freight environment. That's on the demand side. Then also on the buy side for the actual procurement of truck pricing, continuing to work with our trucking partners and buying the truck load capacity at the right kind of price in the market as well to maintain our pricing和margin discipline. So those are the actions that our team's focused on in this environment, and we expect to be able to achieve the results we talked about the rest of the year by approaching this year, approaching last year's results as well.