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ZTO Express (ZTO) Q4 Earnings Top Estimates, Decline Y/Y

Zacks Equity Research

ZTO Express (Cayman) Inc.’s ZTO 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 this China-based 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.

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

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

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%.

Special Dividend

The company’s board cleared a special dividend of 24 cents per share for 2018, payable Apr 8, 2019 to shareholders of record as of Apr 1.

Zacks Rank & Key Picks

ZTO Express carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the broader Transportation sector are Expeditors International of Washington, Inc. EXPD, Hertz Global Holdings, Inc HTZ and Azul S.A. AZUL. While Azul sports a Zacks Rank #1 (Strong Buy), Expeditors and Hertz carry a Zacks Rank #2 (Buy).  You can see the complete list of today’s Zacks #1 Rank stocks here.

Shares of Expeditors, Hertz and Azul have rallied more than 12%, 21% and 14%, respectively, so far this year.

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