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ZTO Express (ZTO) Q3 Earnings Top Estimates, Increase Y/Y

ZTO Express (Cayman) Inc.’s ZTO third-quarter 2019 earnings (excluding a penny from non-recurring items) of 24 cents per share (RMB 1.69) beat the Zacks Consensus Estimate by 2 cents. The bottom line also improved significantly year over year. Results benefited from impressive parcel volume growth. Notably, the company’s parcel volume expansion was higher than the industry average by 18.4 percentage points.

The top line also rose substantially year over year to $736.7 million (RMB 5,265.8 million), driven by a 26.8% year-over-year rise in revenues from the company’s express delivery services unit.

Express delivery services revenues were boosted by a 45.9% jump in parcel volume to 3,057.9 million. Freight forwarding services (acquired during the fourth quarter of 2017) revenues contributing 5.2% to the top line decreased 5.8% year over year.  However, revenues from sales of accessories surged 38.2%, primarily owing to increased sales of thermal paper used for printing digital waybills.

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

 

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

ZTO Express (Cayman) Inc. price-consensus-eps-surprise-chart | ZTO Express (Cayman) Inc. Quote


Meanwhile, total operating expenses at this China-based company declined approximately 16% to RMB 196.4 million despite a 16.6% rise in selling, general and administrative (SG&A) expenses. Apart from other factors, higher salary and accrued bonus escalated SG&A expenses during the reported quarter. Gross margin contracted to 30.3% in the third quarter from 31.3% a year ago. This downside was due to expansion in parcel volumes, volume incentives and cost productivity gain. As of Sep 30, 2019, ZTO Express repurchased 7.7 million ADSs at average price of $17.33 per ADS.

2019 Guidance Intact

The company reiterates its outlook for full-year parcel volumes and adjusted net income. Parcel volumes are anticipated in the range of 11.51-11.93 billion for the current year, implying a 35-40% improvement from the year-ago reported figure. Additionally, adjusted net income is predicted in the band of RMB 4.8-RMB 5.2 billion, indicating an ascent of 14.3-23.8% from the prior-year reported number.

Zacks Rank & Key Picks

ZTO Express carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the broader Transportation sector are GATX Corporation GATX, Allegiant Travel Company ALGT and Hawaiian Holdings, Inc. HA, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Shares of GATX, Allegiant and Hawaiian Holdings have rallied more than 13%, 69% and 15%, respectively, so far this year.

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