We recently compiled a list of the 7 Cheap Transportation Stocks to Buy According to Analysts. In this article, we are going to take a look at where Matson, Inc. (NYSE:MATX) stands against the other cheap transportation stocks.
The 33rd Annual Study of Logistics and Transportation Trends was posted on Supply Chain Management Review (SCMR) on September 12. It highlighted the growing challenges facing the logistics and transportation industry as market conditions, regulations, and technological advancements evolve.
The study surveyed over 200 industry professionals, of which 85% had 15+ years of experience and 80% held senior positions. The report provides insight into spending trends, strategies, performance, and regulatory impacts.
The study noted a significant decline in private fleet spending, down to 7.23%, while intermodal transport spending reached a decade-high of 6.5%. Larger shippers (sales over $3 billion) generally align with these trends but spend less on small package and less-than-truckload (LTL) services.
All performance metrics tracked in the study saw declines from 2023, with profitability, return on assets, competitive positioning, and revenue growth all down. Customer satisfaction remained high but showed signs of strain.
Talent shortages were a critical issue, especially in mid-level management and low-wage positions. Companies struggle to offer training due to a lack of time and knowledgeable trainers, with only 39% having formal learning programs. While logistics jobs offer stability and growth opportunities, they are perceived to lag in flexibility and benefits.
Growth Despite Challenges
According to Benchmark International, the global freight and logistics market is projected to grow to $18.69 billion by 2026, with a 4.4% annual growth rate. The logistics segment alone is expected to reach $6.55 trillion by 2027, growing at 4.7% per year. The market includes services like transportation, warehousing, consultation, and packaging across several industries such as manufacturing, agriculture, and construction. Asia-Pacific leads the market share, while North America is expected to grow the fastest by 2027.
Some of the most significant drivers of growth include trade agreements, technological advancements, and globalization. Innovations such as AI, blockchain, and GPS have streamlined logistics operations. The surge in e-commerce and online shopping has also fueled demand for efficient delivery systems, especially “last-mile” services, which represent the costliest part of shipping. The rise of the gig economy, where local couriers fulfill deliveries, has helped reduce these costs.
Sustainability is becoming a focus in logistics, with green initiatives offering fuel savings and appealing to eco-conscious consumers. Furthermore, mergers and acquisitions in the trucking and maritime sectors are expected to increase in 2024, which are driven by lower interest rates and advancements in fleet management technologies.
Our Methodology
For this article, we used transportation ETFs to identify nearly 40 stocks. Next, we narrowed our list to 7 stocks with the lowest PE ratios and highest average analyst price target, as of September 20. The PE ratio of all the stocks in our list is lower than 20.
We also mentioned the hedge fund sentiment around each stock which was taken from Insider Monkey’s database of over 900 elite hedge funds. Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A processional line of imposing cargo ships in a large port, capturing the scope of the company’s ocean transportation business.
Matson, Inc. (NYSE:MATX)
Average Analyst Price Target Upside as of September 20: 9.12%
PE Ratio (FWD) as of September 20: 11.97
Number of Hedge Fund Holders: 27
One of the cheap transportation stocks, Matson, Inc. (NYSE:MATX) has been an important player in the ocean transportation and logistics sector since its founding in 1882. The company operates through two main segments, Ocean Transportation and Logistics.
Its Ocean Transportation segment specializes in freight services for domestic markets such as Hawaii, Japan, Alaska, and Guam, as well as various island economies in Micronesia. The segment handles a diverse range of cargo, including dry and refrigerated goods, beverages, and other commodities, ensuring reliable delivery to these regions.
In addition to ocean freight, its Logistics segment provides comprehensive services that include transportation brokerage, less-than-container load consolidation, and freight forwarding. This division also offers warehousing, distribution, and supply chain management services, allowing the company to cater to a wide range of customer needs and enhance operational efficiency.
With a consensus Buy rating by 3 analysts, Matson’s (NYSE:MATX) average price target of $147.00 has an upside of 9.12% to the stock’s present level, as of September 20.
In the second quarter, the company showed strong financial performance, reporting EPS of $3.31, up from $2.26 in the same quarter the previous year. Net income also saw a significant increase, reaching $113.2 million compared to $80.8 million in Q2 2023. The strong performance was seen in both segments, which points to the effectiveness of its operational strategies.
Matson (NYSE:MATX) took proactive steps to return value to shareholders as it repurchased approximately 0.6 million shares during the second quarter. It is in a strong position, with cash and cash equivalents rising by $34.2 million from the end of 2023 to $168.2 million, as of June 30, 2024.
Furthermore, total debt decreased by $19.9 million over the first half of the year, leaving it at $420.7 million, with the majority classified as long-term debt. The reduction in debt is a positive sign of the company’s commitment to maintaining a healthy balance sheet.
The company expects that its Ocean Transportation operating income for the third quarter of 2024 will be significantly higher than the $118.2 million achieved in the same period last year. The company also expects moderate growth in operating income for the fourth quarter compared to the $66.4 million reported in Q4 2023. The forecasts indicate a strong outlook as the company continues to execute its plans effectively.
According to Insider Monkey’s database, 27 hedge funds held stakes in Matson (NYSE:MATX) in the second quarter, with positions worth $230.763 million. With 362,452 shares of the company, valued at $6.147 million, Citadel Investment Group is the largest shareholder of the company, as of June 30.
The London Company stated the following regarding Matson, Inc. (NYSE:MATX) in its Q2 2024 investor letter:
“Matson, Inc. (NYSE:MATX) – MATX ocean freight services are benefiting from rising shipping rates and improving market conditions. Global ocean freight pricing has been driven up by the ongoing disruption in the Red Sea, coupled with ramping peak season demand and healthier trade volumes. MATX’s success since the onset of the pandemic has led to permanent volume additions in the China trade lane, a transformed balance sheet. and significant share count reduction. MATX remains strategically positioned as a US Jones Act shipping operator and its expedited freight service continues to offer an attractive value proposition for its customers.”
Overall MATX ranks 7th on our list of the cheap transportation stocks to buy according to analysts. While we acknowledge the potential of MATX as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is promising and trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.