ZTO Express (Cayman) Inc. (NYSE:ZTO) shares fell 5.5% to US$26.00 in the week since its latest full-year results. It looks like a credible result overall - although revenues of CN¥22b were in line with what analysts predicted, ZTO Express (Cayman) surprised by delivering a statutory profit of CN¥7.23 per share, a notable 18% above expectations. Analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. With this in mind, we've gathered the latest statutory forecasts to see what analysts are expecting for next year.
Following the latest results, ZTO Express (Cayman)'s 17 analysts are now forecasting revenues of CN¥26.7b in 2020. This would be a substantial 21% improvement in sales compared to the last 12 months. Statutory earnings per share are forecast to reduce 2.8% to CN¥7.04 in the same period. Before this earnings report, analysts had been forecasting revenues of CN¥27.7b and earnings per share (EPS) of CN¥7.14 in 2020. So it looks like analysts have become a bit less optimistic after the latest results announcement, with revenues expected to fall even as the company is expected to maintain EPS.
The consensus price target rose 8.8% to CN¥198, with analysts apparently satisfied with the business performance despite lower revenue forecasts. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. There are some variant perceptions on ZTO Express (Cayman), with the most bullish analyst valuing it at CN¥228 and the most bearish at CN¥140 per share. This shows there is still quite a bit of diversity in estimates, but analysts don't appear to be totally split on the stock as though it might be a success or failure situation.
In addition, we can look to ZTO Express (Cayman)'s past performance and see whether business is expected to improve, and if the company is expected to perform better than wider market. It's pretty clear that analysts expect ZTO Express (Cayman)'s revenue growth will slow down substantially, with revenues next year expected to grow 21%, compared to a historical growth rate of 29% over the past five years. By way of comparison, other companies in this market with analyst coverage, are forecast to grow their revenue at 6.2% next year. Even after the forecast slowdown in growth, it seems obvious that analysts still thinkZTO Express (Cayman) will grow faster than the wider market.
The Bottom Line
The most important thing to take away is that there's been no major change in sentiment, with analysts reconfirming that earnings per share are expected to continue performing in line with their prior expectations. Unfortunately analysts also downgraded their revenue estimates, although industry data suggests that ZTO Express (Cayman)'s revenues are expected to grow faster than the wider market. Still, earnings are more important to the intrinsic value of the business. There was also a nice increase in the price target, with analysts feeling that the intrinsic value of the business is improving.
With that in mind, we wouldn't be too quick to come to a conclusion on ZTO Express (Cayman). Long-term earnings power is much more important than next year's profits. At Simply Wall St, we have a full range of analyst estimates for ZTO Express (Cayman) going out to 2022, and you can see them free on our platform here..
We also provide an overview of the ZTO Express (Cayman) Board and CEO remuneration and length of tenure at the company, and whether insiders have been buying the stock, here.
If you spot an error that warrants correction, please contact the editor at email@example.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.
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