A month has gone by since the last earnings report for ZTO Express (Cayman) Inc. (ZTO - Free Report) . Shares have lost about 16.5% 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. <p style="text-align: justify;"><u><strong>Second-Quarter Earnings </strong></u></p><p style="text-align: justify;">ZTO Express' 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.<br /><br />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.<br /><br />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.<br /><br />Total operating expenses 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.<br /><br /><strong>Q3 Outlook</strong><br /><br />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.<br /><br /><br /> </p>
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates. The consensus estimate has shifted -13.64% due to these changes.
At this time, ZTO Express (Cayman) Inc. has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with a D. Charting a somewhat similar path, 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 B. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending downward for the stock, and the magnitude of this revision indicates a downward shift. It's no surprise ZTO Express (Cayman) Inc. has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.