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ZTO Express (Cayman) Inc. (ZTO) Up 4.2% Since Last Earnings Report: Can It Continue?

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It has been about a month since the last earnings report for ZTO Express (Cayman) Inc. (ZTO). Shares have added about 4.2% in that time frame, underperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is ZTO Express (Cayman) Inc. due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

Earnings Beat at ZTO Express in Q4

ZTO Express' fourth-quarter 2019 earnings (excluding 13 cents from non-recurring items) of 30 cents per share (RMB 2.10) beat the Zacks Consensus Estimate by 1 cents. Moreover, the bottom line rallied 25% year over year. Results benefited from impressive parcel volume growth. Notably, the company’s parcel volume expansion was higher than the industry average by 16.9 percentage points.

Moreover, the top line rose 20.2% year over year to $983.4 million (RMB 6,846.5 million) and surpassed the Zacks Consensus Estimate of $957.1 million. The upside can be attributed to the company’s express delivery services unit, which contributed 89.2% to the topline.

Detailed Operational Statistics

Revenues in Express delivery services increased 24.6% year over year, primarily owing to 36.1% increase in parcel volume. Freight forwarding services revenues, contributing 4.7% to the top line, declined 17.9% year over year.  However, increase in revenues from sales of accessories was in line with higher sales of thermal paper used for printing digital waybills.

Meanwhile, total operating expenses of this China-based company declined approximately 5.4% to RMB 186.4 million despite 41.9% rise in selling, general and administrative (SG&A) expenses. Apart from higher depreciation and amortization expenses, escalated salary and accrued bonus caused the sharp rise in SG&A expenses during the reported quarter. Gross margin expanded to 29.2% in the fourth quarter from 27.5% in the year-ago quarter. The upside was led by volume increase and cost productivity gain of 9.6%.  As of Dec 31, 2019, ZTO Express repurchased 7.7 million ADSs at average price of $17.33.

Liquidity & Dividend

ZTO Express exited 2019 with total liquidity (cash and cash equivalents) of $757 million.

Moreover, a special dividend of 30 cents per ADS for 2019 has been approved by the board of directors. It is expected to be paid on Apr 20, 2020 to shareholders as of Apr 8, 2020.

2020 Outlook

Considering global concerns and effects of Coronavirus outbreak, the company laid out its first quarter and 2020 guidance. Parcel volumes for first quarter are anticipated to exceed year-ago figures. Moreover, the company targets to grow annual parcel volume at least by 15% over the industry average.

How Have Estimates Been Moving Since Then?

Estimates review followed a downward path over the past two months.

VGM Scores

At this time, ZTO Express (Cayman) Inc. has a great Growth Score of A, though it is lagging a bit on the Momentum Score front 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 B. If you aren't focused on one strategy, this score is the one you should be interested in.


ZTO Express (Cayman) Inc. has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.

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