It has been about a month since the last earnings report for ZTO Express (Cayman) Inc. (ZTO Quick QuoteZTO - Free Report) . Shares have lost about 1.2% 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 Q2 Earnings Beat Estimates

ZTO Express’ second-quarter 2023 earnings of 42 cents per share beat the Zacks Consensus Estimate of 37 cents and improved year over year.

Total revenues of $1,343.3 million missed the Zacks Consensus Estimate of $1,409 million. However, the top line improved year over year, owing to a rise in revenues at the express delivery services unit (contributing 92.3% to the top line).

Detailed Operational Statistics

Revenues in core express delivery business jumped 14.1% year over year due to 23.8% increase in parcel volume and 7.8% decrease in parcel unit price. Parcel volume market share increased to 23.4% in the reported quarter.

Revenue from freight forwarding services fell 27.6% year over year owing to shrinking cross border e-commerce demand and declining pricing.

Revenue from sales of accessories (largely consisted of sales of thermal paper used for digital waybills' printing) climbed 33.8% in line with parcel volume growth. Other revenues were derived mainly from financing services.

The total operating expenses of this China-based company came in at RMB425.7 million compared with RMB217.3 million in the year-ago quarter. Selling, general and administrative expenses increased 10.4% on the back of the rise in employees' compensation and benefits.

Gross margin rate improved to 33.9% from 25.4% in the year-ago period.

Liquidity & Buyback

ZTO Express exited the second quarter of 2023 with cash and cash equivalents of RMB7.78 billion compared with RMB 9.55 billion at the end of March 2023.

As of Jun 30, 2023, ZTO Express purchased 38,473,231 ADSs at an average purchase price of $25.18, including repurchase commissions.

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.

2023 View Intact

ZTO Express has reaffirmed its expectation for parcel volumes in 2023 to 29.27-30.24 billion. The updated guidance represents an increase of 20-24% year over year.

How Have Estimates Been Moving Since Then?

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

VGM Scores

At this time, ZTO Express (Cayman) Inc. has a strong Growth Score of A, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. 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.