By Jeremy C. Owens
The demand for shipping from China to the U.S. led to a huge third quarter for Matson Inc., and the company expects the issue to persist well into next year.
U.S. retailers have struggled to move goods as supply-chain and staffing issues have bogged down the flow. The problem has led some retailers — including Target Corp. /zigman2/quotes/207799045/composite TGT +1.05% , Walmart Inc. /zigman2/quotes/207374728/composite WMT -1.57% , Costco Wholesale Corp. /zigman2/quotes/201191698/composite COST +1.60% and Home Depot Inc. /zigman2/quotes/208081807/composite HD +1.02% — to charter their own ships to obtain goods, as MarketWatch reported last week.
See: Large retailers are chartering ships to bypass supply chain problems. Will the strategy save Christmas?
Matson /zigman2/quotes/205690765/composite MATX -0.29% disclosed Monday afternoon that increased demand for its shipping services will lead to greater-than-expected profit. Matson added a second shipping route from China to Southern California in May 2020, then another one to Northern California earlier this year, known as the CCX.
“Our China service continued to see significant demand for its expedited ocean services, including the new CCX service, as volume for e-commerce, garments and other goods remained elevated heading into the peak season,” Chief Executive Matt Cox said in a statement. “Continued strong demand for the China service was the primary driver of the increase in consolidated operating income year over year.”
Matson said that it expects third-quarter operating profit in its Ocean Transportation division to reach $358 million to $363 million, when analysts were expecting operating profit for the entire company to be $269 million, according to FactSet. That big beat led Matson to predict third-quarter net income of $277.3 million to $285.5 million, or $6.39 to $6.58 a share, which blows away the average analyst estimate of $4.39 a share.
Executives do not believe the issues will go away after the holiday shopping season, either, predicting that they will stick around for at least the next nine months,
“Currently, supply-chain congestion continues in the Transpacific trade lane, with the combination of inventory restocking, peak season and ongoing elevated consumption trends,” Cox said. “We expect these conditions to remain largely in place at least through mid-year 2022.”
Matson expects to fully report third-quarter financial results on Nov. 3.
Matson shares increased more than 2.5% in after-hours trading following the announcement, after closing with a 0.7% increase at $82.67. Shares have experienced a revival amid the shipping difficulties, rising 21.4% in the past three months, as the S&P 500 index /zigman2/quotes/210599714/realtime SPX +1.32% has gained 0.5%.