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Here's Why Investors Should Avoid ZTO Express Stock Now
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ZTO Express Cayman Inc. (ZTO - Free Report) is facing significant challenges from rising operating expenses and a deteriorating liquidity position, which are adversely affecting its bottom line and making it an unattractive choice for investors’ portfolios.
Let’s delve deeper.
ZTO: Key Risks to Watch
Southward Earnings Estimate Revision: The Zacks Consensus Estimate for current-year earnings has been revised 5.2% downward over the past 60 days and is pegged at $1.65 per share. Meanwhile, the consensus estimate for 2026 earnings is pegged at $1.78 per share, declining 6.8% over the past 60 days.
The unfavorable estimate revision indicates brokers’ lack of confidence in the stock.
Dim Price Performance: ZTO Express shares have lost 26.5% in the past year compared with the industry’s 16.6% decline.
Image Source: Zacks Investment Research
Weak Zacks Rank: ZTO currently carries a Zacks Rank #5 (Strong Sell).
Unimpressive Earnings Surprise History: ZTO has a discouraging earnings surprise history, having surpassed the Zacks Consensus Estimate in two of the trailing four quarters and missing twice. The average negative surprise is 2.9%.
Bearish Industry Rank: The industry to which ZTO Express belongs currently has a Zacks Industry Rank of 195 (out of 245). Such an unfavorable rank places it in the bottom 20% of Zacks Industries.Studies show that 50% of a stock price movement is directly related to the performance of the industry group it belongs to.
A mediocre stock within a strong group is likely to outperform a robust stock in a weak industry. Reckoning the industry’s performance becomes imperative in this case.
Headwinds: ZTO Express is under increasing pressure on its bottom line due to rising expenses, which are challenging its financial stability. In the first quarter of 2025, the company experienced a 17.9% year-over-year increase in total operating expenses. This rise was largely due to higher sorting hub operating costs and other related expenses.
The operating costs of the sorting center were $319 million, an increase of 6.8% year over year. Trunk transportation costs were $480.0 million, an increase of 3.3% year over year. The company is now grappling with the impact of these escalating costs, which are putting additional strain on its profitability and overall financial health.
Moreover, the company’s financial stability is under pressure, as reflected by a declining current ratio (a measure of liquidity). ZTO’s current ratio fell from 1.49 in 2022 to 1.34 in 2023 and dropped further to 1.07 in 2024. In the first quarter of 2025, the current ratio was pegged at 1.05. This consistent downward trend is concerning, as it raises questions about the company’s ability to meet its short-term debt obligations.
CPA has an expected earnings growth rate of 14.3% for the current year. The company has an impressive earnings surprise history. Its earnings outpaced the Zacks Consensus Estimate in each of the trailing four quarters, delivering an average beat of 5.5%. Shares of CPA have risen 24.7% year to date.
RYAAY currently sports a Zacks Rank of 1.
RYAAY has an expected earnings growth rate of 30.5% for the current year. The company has a mixed earnings surprise history. Its earnings outpaced the Zacks Consensus Estimate in two of the trailing four quarters and missed twice, delivering an average beat of 46.6%. Shares of RYAAY have rallied 29.9% year to date.
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Here's Why Investors Should Avoid ZTO Express Stock Now
ZTO Express Cayman Inc. (ZTO - Free Report) is facing significant challenges from rising operating expenses and a deteriorating liquidity position, which are adversely affecting its bottom line and making it an unattractive choice for investors’ portfolios.
Let’s delve deeper.
ZTO: Key Risks to Watch
Southward Earnings Estimate Revision: The Zacks Consensus Estimate for current-year earnings has been revised 5.2% downward over the past 60 days and is pegged at $1.65 per share. Meanwhile, the consensus estimate for 2026 earnings is pegged at $1.78 per share, declining 6.8% over the past 60 days.
The unfavorable estimate revision indicates brokers’ lack of confidence in the stock.
Dim Price Performance: ZTO Express shares have lost 26.5% in the past year compared with the industry’s 16.6% decline.
Image Source: Zacks Investment Research
Weak Zacks Rank: ZTO currently carries a Zacks Rank #5 (Strong Sell).
Unimpressive Earnings Surprise History: ZTO has a discouraging earnings surprise history, having surpassed the Zacks Consensus Estimate in two of the trailing four quarters and missing twice. The average negative surprise is 2.9%.
Bearish Industry Rank: The industry to which ZTO Express belongs currently has a Zacks Industry Rank of 195 (out of 245). Such an unfavorable rank places it in the bottom 20% of Zacks Industries.Studies show that 50% of a stock price movement is directly related to the performance of the industry group it belongs to.
A mediocre stock within a strong group is likely to outperform a robust stock in a weak industry. Reckoning the industry’s performance becomes imperative in this case.
Headwinds: ZTO Express is under increasing pressure on its bottom line due to rising expenses, which are challenging its financial stability. In the first quarter of 2025, the company experienced a 17.9% year-over-year increase in total operating expenses. This rise was largely due to higher sorting hub operating costs and other related expenses.
The operating costs of the sorting center were $319 million, an increase of 6.8% year over year. Trunk transportation costs were $480.0 million, an increase of 3.3% year over year. The company is now grappling with the impact of these escalating costs, which are putting additional strain on its profitability and overall financial health.
Moreover, the company’s financial stability is under pressure, as reflected by a declining current ratio (a measure of liquidity). ZTO’s current ratio fell from 1.49 in 2022 to 1.34 in 2023 and dropped further to 1.07 in 2024. In the first quarter of 2025, the current ratio was pegged at 1.05. This consistent downward trend is concerning, as it raises questions about the company’s ability to meet its short-term debt obligations.
Stocks to Consider
Investors interested in the Transportation sector may consider Copa Holdings (CPA - Free Report) and Ryanair (RYAAY - Free Report) .
CPA currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
CPA has an expected earnings growth rate of 14.3% for the current year. The company has an impressive earnings surprise history. Its earnings outpaced the Zacks Consensus Estimate in each of the trailing four quarters, delivering an average beat of 5.5%. Shares of CPA have risen 24.7% year to date.
RYAAY currently sports a Zacks Rank of 1.
RYAAY has an expected earnings growth rate of 30.5% for the current year. The company has a mixed earnings surprise history. Its earnings outpaced the Zacks Consensus Estimate in two of the trailing four quarters and missed twice, delivering an average beat of 46.6%. Shares of RYAAY have rallied 29.9% year to date.