It has been about a month since the last earnings report for ZTO Express (Cayman) Inc. (ZTO). Shares have lost about 0.9% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is ZTO Express (Cayman) Inc. due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Earnings Beat at ZTO Express in Q4
The company's fourth-quarter 2018 earnings of 24 cents per share beat the Zacks Consensus Estimate of 23 cents. However, the bottom line declined substantially year over year.
Meanwhile, the top line improved significantly year over year to $818.5 million (RMB 5,627.5 million). This upside was driven by a 29.4% year-over-year increase in revenues from the company’s express delivery services unit.
Segmental revenues were boosted by a 34.7% surge in parcel volume to 2,714 million. Freight forwarding services (acquired during the fourth quarter of 2017) contributed 7% to the top line. The 25.3% rise in revenues from sales of accessories was primarily attributable to increased sales of thermal paper used for printing digital waybills.
Total operating expenses at the company soared 54.5% to RMB197 million. Higher selling, general and administrative (SG&A) expenses induced a rise in operating expenses. Apart from other factors, rise in salary and accrued bonus escalated SG&A expenses during the reported period.
Gross margin contracted to 27.5% in the fourth quarter compared with 31.2% a year ago. This downside was due to expansion in parcel volumes. During the quarter under review, ZTO Express repurchased 1.7 million ADSs at average price of $15.85 per ADS.
Bullish 2019 Outlook
The company anticipates parcel volume in the range of 11.51-11.93 billion for the current year, representing a year-over-year improvement of 35-40%. Additionally, adjusted net income is predicted in the band of RMB4.8-RMB5.2 billion, indicating an increase of 14.3-23.8%.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates. The consensus estimate has shifted -7.69% due to these changes.
Currently, ZTO Express (Cayman) Inc. has an average Growth Score of C, however its Momentum Score is doing a bit better with a B. However, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been trending upward for the stock, and the magnitude of this revision looks promising. Notably, ZTO Express (Cayman) Inc. has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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