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ZTO Express Cayman Inc. (ZTO) Up 19.1% Since Last Earnings Report: Can It Continue?

A month has gone by since the last earnings report for ZTO Express Cayman Inc. (ZTO). Shares have added about 19.1% in that time frame, outperforming 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 its most recent earnings report in order to get a better handle on the important drivers.

Earnings Beat at ZTO Express in Q2

ZTO Express’ earnings of 24 cents per share beat the Zacks Consensus Estimate by a penny. However, the bottom line declined year over year due to high costs.

Total revenues of $1,134.5 million increased in double digits year over year owing to rise in revenues at the core express delivery services unit (contributing 90.8% of the top line).

Detailed Operational Statistics

Revenues in Express delivery services jumped 18.1% year over year due to 25.6% increase in parcel volume and 5.9% decrease in parcel unit price, mainly driven by per parcel weight decline. Parcel volume market share was 21% in the reported quarter.

Freight forwarding services revenues declined 32.9% year over year with cross-border e-commerce demand and pricing returning to a normal level post recovery from the pandemic. Also, revenues from sale of accessories dipped 2.2% year over year.

Total operating expenses climbed 77.8% year over year to RMB 218 million. Selling, general and administrative expenses rose 26.1% with increase in compensation and benefits, office expenditures, depreciation, and write-off of obsolete assets.

Gross margin deteriorated to 22.8% in the second quarter from 27.6% in the year-ago period. As of Jun 30, 2021, ZTO Express repurchased 17.52 million ADSs at an average price of $23.17.

ZTO Express still anticipates parcel volumes in the range of 22.95-23.80 billion for 2021, suggesting a 35-40% increase from the figure reported in 2020.

Liquidity

ZTO Express exited the second quarter with cash and cash equivalents of RMB 12.1 billion compared with RMB 14.2 billion at the end of 2020.

How Have Estimates Been Moving Since Then?

It turns out, estimates review have trended downward during the past month. The consensus estimate has shifted -8.33% due to these changes.

VGM Scores

Currently, ZTO Express Cayman Inc. has an average Growth Score of C, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

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

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of this revision indicates a downward shift. It's no surprise ZTO Express Cayman Inc. has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.


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