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Why Is ZTO Express Cayman Inc. (ZTO) Down 8.4% Since Last Earnings Report?

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It has been about a month since the last earnings report for ZTO Express Cayman Inc. (ZTO - Free Report) . Shares have lost about 8.4% 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 catalysts.

Earnings Miss at ZTO Express in Q1

ZTO Express’ first-quarter 2021 earnings (excluding 4 cents from non-recurring items) of 14 cents per share missed the Zacks Consensus Estimate by 4 cents. However, the bottom line increased 16.7% year over year.

Total revenues of $987.9 million (RMB 6,473 million) increased in double digits year over year, owing to rise in revenues at the core express delivery services unit (contributing 87.6% to the top line).

Detailed Operational Statistics

Revenues in Express delivery services surged 65.2% year over year due to 88.5% jump in parcel volume and 12.4% decline in parcel unit price mainly driven by competition and per parcel weight decline. Parcel volume market share increased by 1.5 percentage points to 20.4%.

Freight forwarding services revenues augmented 66.8% year over year, owing to increase in cross-border e-commerce demand and improved pricing amid coronavirus concerns. Also, revenues from sale of accessories increased 47% year over year due to higher usage of lower-priced single-sheet digital waybill since the second half of 2019.

Meanwhile, total operating expenses of this China-based company climbed up 3.8% to RMB 463.7 million. Selling, general and administrative expenses rose 10.7% year over year, with increases in salaries and accrued bonuses.

Gross margin deteriorated to 16.9% in the first quarter from 20.9% in the year-ago quarter. As of Mar 31, 2021, ZTO Express repurchased 17.4 million ADSs at an average price of $23.14. On Mar 31, the board of directors approved modifications to its share repurchase program by increasing the aggregate value of shares that may be bought back from $500 million to $1 billion and extending the effective time to Jun 30, 2023.

ZTO Express still anticipates parcel volumes in the range of CNY22.95-CNY23.80 billion for 2021, suggesting an increase in the 35-40% range from the figure reported in 2020.

Liquidity

ZTO Express exited the first quarter with cash and cash equivalents of RMB 11.1 billion compared with RMB 14.2 billion at the end of 2020.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended downward during the past month. The consensus estimate has shifted -8% due to these changes.

VGM Scores

Currently, ZTO Express Cayman Inc. has a subpar Growth Score of D, though it is lagging a bit 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 D. 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. 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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