Why Is ZTO Express Cayman Inc. (ZTO) Down 0% Since Last Earnings Report?

Zacks Equity Research
·3 min read

It has been about a month since the last earnings report for ZTO Express Cayman Inc. (ZTO). Shares have lost about 0% in that time frame, outperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is ZTO Express Cayman Inc. due for a breakout? 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.

ZTO Express Q1 Earnings In Line

ZTO Express’ first-quarter 2022 earnings (excluding 3 cents from non-recurring items) of 21 cents per share was in line with the Zacks Consensus Estimate. The bottom line surged more than 40% year over year despite higher operating expenses and the impact of the Omicron-induced woes.

Total revenues of $1,246.8 million improved more than 20% year over year, owing to a rise in revenues at the core express delivery services unit (contributing 91.3% to the top line).

Detailed Operational Statistics

Revenues in Express delivery services jumped 26.6% year over year due to a 16.8% increase in parcel volume and an 8.5% increase in parcel unit price. Parcel volume market share was 21.6% in the reported quarter.

Freight forwarding services’ revenues declined 32.8% year over year, with cross-border e-commerce demand and pricing returning to a normal level post recovery from the pandemic. However, revenues from the sale of accessories climbed 8.4% year over year.

Total operating expenses of this China-based company escalated 8.5% year over year to RMB503.2 million. Selling, general and administrative expenses dipped 0.3% due to a decrease in share-based compensation expenses.

Gross margin improved to 20.5% in the first quarter from 16.9% in the year-ago period. As of Mar 31, 2022, ZTO Express repurchased 36.07 million ADSs at an average purchase price of $25.21.

Liquidity

ZTO Express, exited the first quarter of 2022 with cash and cash equivalents of RMB9.90 billion compared with RMB9.72 billion at the end of December 2021.

Outlook

Due to uncertainty surrounding the prevalent pandemic, ZTO Express has reduced its expectation for parcel volumes in 2022 to 24.96-25.86 billion from 26.30-27.64 billion, anticipated previously. However, the guided range represents an increase of 12-16% year over year.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended downward during the past month.

The consensus estimate has shifted -6.9% due to these changes.

VGM Scores

Currently, ZTO Express Cayman Inc. has a nice Growth Score of B, 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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