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ZTO Express Cayman Inc. (ZTO) Down 10.4% Since Last Earnings Report: Can It Rebound?

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A month has gone by since the last earnings report for ZTO Express Cayman Inc. (ZTO). Shares have lost about 10.4% 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 the most recent earnings report in order to get a better handle on the important catalysts.

Earnings Miss at ZTO Express in Q4

ZTO Express’ fourth-quarter 2020 earnings of 24 cents per share missed the Zacks Consensus Estimate by a penny. Moreover, the bottom line declined significantly year over year due to 20.1% decrease in parcel unit price as a result of intense competition.

Total revenues of $1,265.5 million (RMB 8,257.1 million) increased in double digits year over year, owing to significant rise in revenues at the core express delivery services unit (accounted for 86.9% of the top line).

Detailed Operational Statistics

Revenues in Express delivery services surged 17.1% year over year due to 46.5% jump in parcel volume. Parcel volume market share increased by 1.3 percentage points to 20.4%. Freight forwarding services revenues augmented 92.1% year over year, owing to increase in cross-border e-commerce demand amid coronavirus concerns. Also, revenues from sale of accessories increased 7.9% year over year due to higher usage of lower-priced single-sheet digital waybill since the second half of 2019.

Meanwhile, total operating expenses of this China-based company climbed 56.5% to RMB 291.71 million. Selling, general and administrative expenses rose 6.5% year over year, with increases in salaries and accrued bonuses. Gross margin deteriorated to 22.5% in the fourth quarter from 29.2% in the year-ago quarter. As of Dec 31, 2020, ZTO Express repurchased 14.5 million ADSs at an average price of $22.2.

Liquidity

ZTO Express exited the fourth quarter with cash and cash equivalents of RMB 14.21 billion compared with   RMB 5.27 billion at the end of 2019.

Special Dividend

ZTO Express’ board approved a special dividend of 25 cents per share, which is expected to be paid on Apr 20, 2021 to holders of class A ordinary shares and on Apr 22, 2021 to holders of ADSs, of record as of Apr 8, 2021.

How Have Estimates Been Moving Since Then?

It turns out, estimates review have trended upward during the past month. The consensus estimate has shifted -13.79% due to these changes.

VGM Scores

At this time, ZTO Express Cayman Inc. has a subpar Growth Score of D, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of F on the value side, putting it in the fifth quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

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 #5 (Strong Sell). We expect a below average return from the stock in the next few months.


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