Is Matson Stock A Buy?

Is Matson Stock A Buy? If you’ve ever seen an informercial or run an online business, you’re likely aware shipping outside the United States – even to places like Alaska, Hawaii, and Guam – can be a pain. It’s no problem for Matson, Inc. (NYSE:MATX), which has run a logistics business network throughout the Pacific Ocean since 1882.

The company is so successful that it eventually acquired its biggest competitor, Horizon Lines, in 2015 after that company’s executives were found guilty of price fixing in markets like Puerto Rico.

With additive manufacturing burgeoning and COVID-19 straining the global supply chain, analysts are left wondering, is Matson a good stock to buy?

The company recovered from the coronavirus market crash, and it has relatively stabilized from the buyout. It’s working on streamlining and consolidating operations to maximize efficiency.

This requires advanced technology usage – despite its age, oceanic shipping is still a major part of the global economy. The U.S. alone spends nearly $30 billion each year on shipping expenses that create over $436 billion in revenue for the GDP.

Of course, COVID-19 shutdowns created a massive amount of idle container ships, as ports and other services fought to stay open amid product shortages caused by the crisis. Let’s dive into Matson’s operations and opportunities for future gains.

Matson Is A Massive Freight Shipping Operator

Founder William Matson was an orphan who sailed around Cape Horn, before landing in San Francisco, where the company was founded.

Tycoon Claus Spreckels provided the ships, and Matson’s Navigation Company provided shipping of merchandise and commodities like sugar between the continental U.S. and Hawaiian Islands. Soon it expanded to become a massive operator of freight shipping, along with passenger liners.

It also serves much more than just the U.S. and its territories, with routes covering Australia, New Zealand, the South Pacific, and more.

All these routes inevitably connect through to ports in Alaska, San Francisco, and Los Angeles, making for an important component of shipments received on the west coast, although it does also have Atlantic operations too.

With the Fourth Industrial Revolution affected by the coronavirus pandemic, we’re left wondering how this logistics and transportation business will fare.

Is Matson Stock a Buy?

The reason Matson recovered so well from the economic crisis is oceanic transport was still necessary, if not even more so in the wake of the coronavirus shutdowns.

The supply chain issues mentioned in the media were from the warehouses to the retail stores, not in the warehouses themselves. And as massive warehouses like Amazon’s and Walmart’s were emptied, it only created further need for transportation and shipping.

Unlike the consumer cruise industry that was crippled by the COVID-19 pandemic, oceanic transport became one of the most necessary businesses to get necessary goods and commodities into North America from around the globe. With nearly 90% of world trade hinging on the back of transport ships, now would seem an ideal time to safely invest money in a navigation company that’s been around since the 1800s.

It’s still paying dividends (its most recent quarterly dividend on 8/20/20 is $0.28), and it’ll take more than a coronavirus to slow it down. This is why most analysts have Matson stock graded as an A or Buy. Let’s talk about the inherent risks though.

Risks of Investing in Matson

Although 3D printing never took off on the consumer market, industrial 3D printing (aka additive manufacturing) is considered the key to relieving much of the world’s supply chain issues.

The industry is expected to surpass $50 billion by 2025, and that’s going to take a bite out of the cross-oceanic market share.

Of course, raw supplies (and the 3D printer equipment itself) will still need to be shipped, but there’s plenty of competition for Matson for those lucrative contracts.

The shipping industry could also see profits hit from the U.S.-China trade war. Tensions have been running high between the U.S. and China ever since President Trump took office in 2016, and it only escalated during the 2020 novel coronavirus outbreak.

Since China has so much pull in Southeast Asia, it could make it more difficult for the U.S. to conduct trade in the region. This could place Matson in the crossfire as an innocent casualty, forcing it to pivot into other businesses.

Because it has so many A grades and buy ratings, there’s also a chance it’ll get overvalued. Too many people piling into an investment can drive market prices higher, leaving later investors holding the bag if things go south. Be sure to perform due diligence on the company’s financials before investing.

Matson Swallowed Up Its Major Competitor

Matson has proven itself a sustainable business by swallowing its largest competitor, Horizon Lines, in 2015. This positions it as a legacy company for U.S. trade routes in the Pacific Ocean and makes it difficult to beat.

It doesn’t have a complete monopoly on freight shipping in the U.S. though – Crowley maritime, Pasha Hawaii, United Yacht Transport, and Watermen Steamship Corporation all have a stake in U.S. docks.

While it’s not going likely to be swallowed by the competition, it’s still there. So long as leadership doesn’t get complacent, it should be fine, though.

Matson Stock Forecast: The Bottom Line

Matson stock is widely regarded as a highly rated company by market analysts. It has an A or Buy rating from major ratings firms and is still paying dividends to investors as of the third quarter of 2020.

Logistics and freight services are proving invaluable during the COVID-19 crisis, and even with a push to additive manufacturing, the market has value.

The company does still have risk involved, as it could become entangled in an escalating geopolitical situation between the U.S. and China. Otherwise, the coast is clear for this shipping company’s Pacific Ocean trade routes and beyond.

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The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.