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Strong Cash Balance Aids ZTO Express (ZTO), High Costs Ail

We have recently updated a report on ZTO Express (Cayman) Inc. ZTO.

The long-term expected earnings per share (three to five years) growth rate for ZTO Express is pegged at 18.2%. The stock has gained 9.3% in the past year compared with a 7.6% rise of the industry.

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Strong performance in the core express delivery services unit is encouraging. Revenues in the unit increased 29.2% year over year in the first nine months of 2021, owing to an increase in parcel volumes. ZTO Express anticipates parcel volumes in the range of 22.2-22.7 billion in 2021, indicating a rise of 30.6-33.5% year over year.

ZTO Express exited the third quarter with cash and cash equivalents of RMB 10.36 billion, higher than the short-term bank borrowings of $4.43 billion. This implies that the company has enough cash to pay off its short-term debt obligations.

High selling, general and administrative (SG&A) expenses might push up operating expenses and hurt the bottom line. An increase in salaries and accrued bonuses is leading to higher SG&A expenses, which increased 12.4% year over year in the first nine months of 2021.

Zacks Rank & Stocks to Consider

ZTO Express currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1(Strong Buy) Rank stocks here.

Some better-ranked stocks in the broader Zacks Transportation sector are Knight-Swift Transportation Holdings Inc. KNX, Landstar System, Inc. LSTR and C.H. Robinson Worldwide, Inc. CHRW.

The long-term expected earnings per share (three to five years) growth rate for Knight-Swift is pegged at 15%. KNX is benefitting from an improvement in the adjusted operating ratio to 82.8% in the first nine months of 2021 compared with 86.6% reported in the year-ago period. In third-quarter 2021, the metric improved to 81.3% from 83.9%, a year ago.  

This uptick in adjusted operating ratio is primarily driven by increased revenues in the Trucking, Logistics and Intermodal segments. Lower the value of the metric, the better. The stock has surged 39.8% in the past year. Knight-Swift sports a Zacks Rank #1.

The long-term expected earnings per share (three to five years) growth rate for Landstar is pegged at 12%. LSTR is benefitting from a gradual recovery in the economy and freight market conditions in the United States.

LSTR’s top and the bottom line increased substantially in each quarter from third-quarter 2020 levels, owing to robust revenues generated from the primary segment — truck transportation. The stock has returned 30.9% in the past year. Landstar carries a Zacks Rank #2(Buy).

The long-term expected earnings per share (three to five years) growth rate for C.H. Robinson is pegged at 9%. CHRW is benefitting from higher pricing and volumes across most of its service lines. Total revenues jumped 42.4% year over year in the first nine months of 2021, with higher revenues across all the segments.

CHRW’s measures to reward its shareholders are encouraging. Driven by the tailwinds, the stock has increased 2.5% in the past year. C.H. Robinson carries a Zacks Rank #2.

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C.H. Robinson Worldwide, Inc. (CHRW): Free Stock Analysis Report
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ZTO Express Cayman Inc. (ZTO): Free Stock Analysis Report
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