MATX - Matson downgraded at Stifel despite strong earnings

Despite calling its quarterly earnings figures “eye-watering”, Stifel analyst Benjamin Nolan told clients he can no longer recommend Matson ( NYSE: MATX ) stock on Tuesday.

For the second quarter, the company notched GAAP EPS of $9.49 and a 44% jump in revenue to $1.26B. Those figures represented significant acceleration from EPS of $3.71 and $874.9M in the prior year.

He explained that cash flow is likely to decline from current levels, just as interest rates rise and the broader container market moves into a period of oversupply. Under these dynamics, there is “palpable economic uncertainty” for the company in coming quarters, in his view.

“While the current container shipping bonanza has started to soften, MATX's transformed balance sheet and market position should continue to allow the company to earn more than $4.00/share in earnings in a more normalized environment,” Nolan concluded. “Despite shares trading at a discount to the average 10x on normalized levels, we believe the risk/reward given the current macro container market outlook does not present enough conviction to recommend buying the shares.”

Matson ( MATX ) shares fell 3.52% prior to Tuesday’s market open.

Read more on the company’s second quarter earnings results .

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