A month has gone by since the last earnings report for ZTO Express Cayman Inc. (ZTO Quick QuoteZTO - Free Report) . Shares have lost about 8% in that time frame, underperforming 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 the most recent earnings report in order to get a better handle on the important drivers.

Earnings Beat at ZTO Express in Q3

ZTO Express' earnings of 23 cents per share (RMB 1.53) beat the Zacks Consensus Estimate by a penny. However, the bottom line declined year over year due to 18.4% decrease in parcel unit price as a result of intense competition. Total revenues of $977.8 million (RMB 6,638.8 million) increased in double digits year over year owing to significant rise in revenues at the core express delivery services unit (accounted for 87.1% of the top line).

Detailed Operational Statistics

Revenues in Express delivery services surged 23.4% year over year, due to 51.2% jump in parcel volume. Parcel volume market share increased by 1.9 percentage points to 20.8%. Freight forwarding services revenues augmented 75.4% year over year owing to increase in cross-border e-commerce demand amid coronavirus concerns. Also, revenues from sales of accessories increased 8.1% year over year due to higher usage of lower-priced single-sheet digital waybill since the second half of 2019.

Meanwhile, total operating expenses climbed 12.9% to RMB 221.83 million. Selling, general and administrative expenses soared 28.4% year over year with increases in salaries and accrued bonuses as well as depreciation and amortization expenses. Gross margin deteriorated to 21% in the third quarter from 30.3% in the year-ago quarter. As of Sep 30, 2020, ZTO Express repurchased 7.7 million ADSs at average price of $17.33

Liquidity

ZTO Express exited the quarter with cash and cash equivalents of RMB 16.41 billion compared with   RMB 5.27 billion at the end of 2019.

Outlook

ZTO Express maintains its guidance for parcel volumes and adjusted net income in 2020. Parcel volumes are still expected in the range of 16.2-17 billion, indicating a rise of 33.7-40.3% from the year-ago period.  Additionally, adjusted net income is anticipated between RMB 4.8 billion and RMB 5.2 billion, implying a 1.7-9.3% fall year over year.

How Have Estimates Been Moving Since Then?

Estimates revision followed a downward path over the past two months.

VGM Scores

At this time, ZTO Express Cayman Inc. has an average Growth Score of C, however its Momentum Score is doing a lot better with an A. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the top 40% 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

ZTO Express Cayman Inc. has a Zacks Rank #5 (Strong Sell). We expect a below average return from the stock in the next few months.