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ZTO Express (ZTO) Q2 Earnings Beat on Parcel Volume Growth

Zacks Equity Research

ZTO Express (Cayman) Inc.’s ZTO second-quarter 2019 adjusted earnings of 25 cents per share (RMB 1.74) beat the Zacks Consensus Estimate by a penny. Moreover, the bottom-line improved year over year. Results benefited from impressive parcel volume growth. Notably, the company’s parcel volume expansion was higher than the industry average by 18.5 percentage points.

Following the earnings beat and its year-over-year improvement, shares of the company rose 2.1% in after-hours trading on Aug 15.

The top line also rose substantially year over year to $790 million (RMB 5,423.6 million), driven by a 30% 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 46.8% jump in parcel volume to 3,106.6 million. Freight forwarding services (acquired during the fourth quarter of 2017) contributed 6.5% to the top line. Further, the 39.8% rise in revenues from sales of accessories was primarily owing to increased sales of thermal paper used for printing digital waybills.

Meanwhile, total operating expenses at this China-based company inched up 2.8% to RMB 275.8 million. Increase in selling, general and administrative (SG&A) expenses induced this rise in operating expenses. Apart from other factors, rise in salary and accrued bonus escalated SG&A expenses during the reported quarter. Gross margin contracted to 32.6% in the second quarter compared with 34.7% a year ago. This downside was due to expansion in parcel volumes, volume incentives and cost productivity gain. As of Jun 30, 2019, ZTO Express repurchased 7.5 million ADSs at average price of $17.32 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, implying a 35-40% improvement from the year-ago reported figure. Additionally, adjusted net income is predicted in the band of RMB 4.8-RMB 5.2 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 GATX Corporation GATX, Herc Holdings Inc. HRI and SkyWest, Inc. SKYW, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

GATX boasts an impressive earnings history, having outperformed the Zacks Consensus Estimate in each of the trailing four quarters, the average being 18.2%. Meanwhile, shares of Herc and SkyWest have rallied more than 51% and 20%, respectively, so far this year.

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