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ZTO Express (ZTO) Q4 Earnings Beat Estimates, Increase Y/Y

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ZTO Express Inc.’s (ZTO - Free Report) fourth-quarter 2019 earnings (excluding 13 cents from non-recurring items) of 30 cents per share (RMB 2.10) beat the Zacks Consensus Estimate by 1 cents. Moreover, the bottom line rallied 25% year over year. Results benefited from impressive parcel volume growth. Notably, the company’s parcel volume expansion was higher than the industry average by 16.9 percentage points.

Moreover, the top line rose 20.2% year over year to $983.4 million (RMB 6,846.5 million) and surpassed the Zacks Consensus Estimate of $957.1 million. The upside can be attributed to the company’s express delivery services unit, which contributed 89.2% to the topline.

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


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

ZTO Express (Cayman) Inc. price-consensus-eps-surprise-chart | ZTO Express (Cayman) Inc. Quote


Detailed Operational Statistics

Revenues in Express delivery services increased 24.6% year over year, primarily owing to 36.1% increase in parcel volume. Freight forwarding services revenues, contributing 4.7% to the top line, declined 17.9% year over year.  However, increase in revenues from sales of accessories was in line with higher sales of thermal paper used for printing digital waybills.

Meanwhile, total operating expenses of this China-based company declined approximately 5.4% to RMB 186.4 million despite 41.9% rise in selling, general and administrative (SG&A) expenses. Apart from higher depreciation and amortization expenses, escalated salary and accrued bonus caused the sharp rise in SG&A expenses during the reported quarter. Gross margin expanded to 29.2% in the fourth quarter from 27.5% in the year-ago quarter. The upside was led by volume increase and cost productivity gain of 9.6%.  As of Dec 31, 2019, ZTO Express repurchased 7.7 million ADSs at average price of $17.33.

Liquidity & Dividend

ZTO, carrying a Zacks Rank # 3 (Hold), exited 2019 with total liquidity (cash and cash equivalents) of $757 million. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Moreover, a special dividend of 30 cents per ADS for 2019 has been approved by the board of directors. It is expected to be paid on Apr 20, 2020 to shareholders as of Apr 8, 2020.

2020 Outlook

Considering global concerns and effects of Coronavirus outbreak, the company laid out its first quarter and 2020 guidance. Parcel volumes for first quarter are anticipated to exceed year-ago figures. Moreover, the company targets to grow annual parcel volume at least by 15% over the industry average.

Stocks to consider

Few better-ranked stocks in the Zacks Transportation sector are GATX Corporation (GATX - Free Report) , Ryanair Holdings plc (RYAAY - Free Report) and Spirit Airlines, Inc. (SAVE - Free Report) . GATX sports a Zacks Rank # 1, whereas Ryanair and Spirit Airlines carry a Zacks Rank #2 (Buy).

Long-term expected earnings per share (three to five years) growth rate for GATX, Ryanair and Spirit Airlines is 15%, 16.6% and 12.5%, respectively.

5 Stocks Set to Double

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Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.

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