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ZTO Express (ZTO) Q1 Earnings Lag, Rise Y/Y on Solid Revenues

Zacks Equity Research

ZTO Express (Cayman) Inc.’s ZTO first-quarter 2019 earnings of 18 cents per share missed the Zacks Consensus Estimate by a penny. However, the bottom line improved substantially year over year.

The earnings lag perhaps disappointed investors. Consequently, shares of the company declined more than 3% in after-hours trading on May 15.

Meanwhile, the top line rose significantly year over year to $681.6 million (RMB 4,574 million). This upside was driven by a 31.5% year-over-year surge in revenues from the company’s express delivery services unit.

ZTO Express (Cayman) Inc. Price, Consensus and EPS Surprise


ZTO Express (Cayman) Inc. Price, Consensus and EPS Surprise

ZTO Express (Cayman) Inc. price-consensus-eps-surprise-chart | ZTO Express (Cayman) Inc. Quote

Segmental revenues were boosted by a 41.6% jump in parcel volume to 2,264 million. Freight forwarding services (acquired during the fourth quarter of 2017) contributed 6.3% to the top line. The 38.4% 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 this China-based company soared 49.7% to RMB 499.7 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 first quarter compared with 29.1% a year ago. This downside was due to expansion in parcel volumes and cost productivity gain. During the quarter under review, ZTO Express repurchased 1.7 million ADSs at average price of $15.85 per ADS.

2019 Guidance Intact

The company reiterates its outlook for full-year parcel volumes and adjusted net income. Parcel volumes are anticipated 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 ascent of 14.3-23.8%.

Zacks Rank & Key Picks

ZTO Express carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the broader Transportation sector are Hertz Global Holdings, Inc HTZ, Hub Group, Inc. HUBG and SkyWest, Inc. SKYW. While SkyWest sports a Zacks Rank #1 (Strong Buy), Hertz Global and Hub Group carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Shares of Hertz Global, Hub Group and SkyWest have rallied more than 28%, 14% and 32%, respectively, on a year-to-date basis.

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