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ZTO Express (ZTO) Q2 Earnings Meet Estimates, Improve Y/Y

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ZTO Express (Cayman) Inc.‘s (ZTO - Free Report) second-quarter earnings (excluding 8 cents from non-recurring items) of 23 cents per share were in line with the Zacks Consensus Estimate. However, the bottom line significantly improved from the year-ago figure backed by revenue growth.

The top line increased more than 40% year over year to $634.4 million (RMB4,197.9 million). The upside was driven by a 29.1% year-over-year increase in revenues from the company’s express delivery services unit.

Segmental revenues were buoyed by a 41.7% increase in parcel volume to 2,116 million. Freight forwarding services (acquired during the fourth quarter of 2017) contributed 7.2% to the top line. The 56.4% rise in revenues from sales of accessories was primarily attributable to increased sales of thermal paper used for printing digital waybills.

Total operating expenses at this China-based company were up 32.5% to RMB 268.4 million. The upside was primarily driven by significantly higher selling, general and administrative (SG&A) expenses in the quarter under review. Apart from other factors, increased salary and accrued bonus resulted in the rise in SG&A expenses during the period.

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

 

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

Another Key Development During Q2

On May 29, Alibaba Group Holding Limited (BABA - Free Report) led a consortium of investors to invest $1.38 billion in ZTO Express. The consortium included Alibaba, Cainiao Smart Logistics Network and other undisclosed investors. Per the deal, which closed in late June, 10% of ZTO Express was acquired by the investors in exchange.

The association is expected to help ZTO Express develop smart delivery solutions and ways for warehouse management. Moreover, its pickup and delivery services as well as cross border logistics are expected to be enhanced owing to the collaboration.

Q3 Outlook

For the third quarter, ZTO Express anticipates parcel volume between 2,073 million and 2,120 million, reflecting a year-over-year increase in the 35-38% range. Adjusted net income is expected to lie between RMB1,000 million and RMB1,050 million, mirroring a year-over-year improvement in the 36.9-43.7% band.

Zacks Rank & Key Picks

ZTO Express carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the broader Transportation Sector are SkyWest, Inc. (SKYW - Free Report) and Old Dominion Freight Line, Inc. (ODFL - Free Report) sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Shares of SkyWest and Old Dominion have surged 63.9% and 51.6%, respectively, in a year’s time.

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