UPDATE: BB&T Capital Upgrades Matson, Inc. (MATX) to Buy

BB&T Capital upgraded Matson, Inc. (NYSE: MATX) from Hold to Buy with a price target of $35.00. With strong FCF and potential changes on the horizon, analyst Kevin W. Sterling thinks now is the time to buy.

"After several years on the sidelines, we are upgrading shares of Matson, as we believe this best-in-class operator is well positioned over the long term to capitalize on firming market fundamentals and a potential shift in the competitive landscape. Given the stock's relative underperformance over the past 52 weeks (+3.4% vs. +19.8% for the S&P 500 and +29.1% for the Dow Transportation average), along with an improving construction cycle in Hawaii, we believe now is the time to own MATX," said Sterling.

"Our price target of $35 is based on an EV/EBITDA multiple of 8.7x our new 2015E, roughly in line with the company's historical average. We are raising our 2015E to $1.50 (from $1.38) reflecting improving fundamentals and we are introducing a 2016E of $1.65, as we believe the firming Hawaiian economy could result in improved volumes and pricing. Additionally, given a potential competitive shift in the Jones Act markets over the next several years, should MATX successfully capture potential market share opportunities, we believe the earnings power could be quite significant beginning in 2016, where EPS could exceed $2.00. We'd also point to the company's strong FCF potential ($161.2M LTM) and its fleet renewal program—two distinct advantages over its competition, in our opinion," he added.

For an analyst ratings summary and ratings history on Matson, Inc. click here. For more ratings news on Matson, Inc. click here.

Shares of Matson, Inc. closed at $27.35 yesterday.

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