ZTO Express Cayman Inc. (ZTO) Up 20.2% Since Last Earnings Report: Can It Continue?

It has been about a month since the last earnings report for ZTO Express Cayman Inc. (ZTO). Shares have added about 20.2% 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.

ZTO Express Q3 Earnings Beat Estimates

ZTO Express’ third-quarter 2022 earnings of 33 cents per share beat the Zacks Consensus Estimate of 26 cents. The bottom line surged year over year despite higher operating expenses and the impact of Omicron-induced woes.

Total revenues of $1,257.5 million improved year over year, owing to a rise in revenues at the express delivery services unit (contributing 90.6% to the top line).

Detailed Operational Statistics

Revenues in Express delivery services jumped 22.7% year over year due to an 11.7% increase in parcel volume and a 9.9% increase in parcel unit price. Parcel volume market share grew by 1.3 points to 22.1% in the reported quarter.

Freight forwarding services’ revenues declined 13.7% year over year, with cross-border e-commerce demand and pricing declining owing to the weak economy and COVID recurrences.

Revenue from sales of accessories climbed 14.3% year over year.

The total operating expenses of this China-based company came in at RMB 269.6 million compared with RMB 207.8 million in the year-ago quarter. Selling, general and administrative expenses increased 13.4% on the back of the rise in employees' compensation and benefits.

The gross margin rate improved to 27.3 % from 21.2 % in the year-ago period.

Liquidity & Buyback

ZTO Express exited the third quarter of 2022 with cash and cash equivalents of RMB14.59 billion compared with RMB9.93 billion at the end of June 2022.

As of Sep 30, 2022, ZTO Express repurchased 36,074,242 ADSs at an average purchase price of $25.21. The company’s board of directors has further approved changes to its existing share repurchase program, increasing the value of shares to be repurchased from $1 billion to $1.5 billion and extending the effective time by one year through Jun 30, 2024. The company anticipates funding the repurchases from its existing cash balance.

View Intact

ZTO Express has updated its expectation for parcel volumes in 2022 to 24.30-24.74 billion (prior view: 24.96-25.86 billion). The updated guidance represents an increase of 9-11% year over year.

How Have Estimates Been Moving Since Then?

It turns out, estimates review have trended upward during the past month.

The consensus estimate has shifted 11.77% due to these changes.

VGM Scores

Currently, ZTO Express Cayman Inc. has a nice Growth Score of B, though it is lagging a bit on the Momentum Score front with a C. Following the exact same course, 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 B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of this revision looks promising. Notably, ZTO Express Cayman Inc. has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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