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ZTO Express Benefits From Higher Parcel Volumes, Costs Hurt

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We recently issued an updated report on ZTO Express (Cayman) Inc. (ZTO - Free Report) .

ZTO Express is gaining from increased parcel volumes and strong performance in the company's express delivery services unit. Even though segmental revenues declined in first-quarter 2020 due to coronavirus woes, the unit is expected to rebound on the back of impressive parcel volumes and drive long-term growth. ZTO Express expects parcel volumes in the range of 15.9-16.4 billion for 2020. This indicates 37-42% increase during the last three quarters of the year.

Performance of the Freight forwarding services unit in the first quarter was impressive. Segmental revenues moved up 2.1% year over year, owing to increase in cross-border e-commerce demand amid coronavirus woes.
Besides, the cash and equivalents at ZTO Express at the end of the first quarter stood at $2,141 million, higher than its current debt figure. This suggests that the company has enough cash to meet its current debt burden.

Meanwhile, high selling, general and administrative (SG&A) expenses are raising operating expenses. Rise in salary and social welfare costs escalated SG&A expenses.

Moreover, coronavirus-related supply-chain issues dented first-quarter 2020 performance of the company. Renewed concerns about the coronavirus outbreak in China are headwinds as well. Additionally, strict government regulations and tight policies of the Chinese market are major deterrents to ZTO Express’ business.

Zacks Rank & Key Picks

ZTO Express carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the Zacks Transportation sector are Scorpio Tankers Inc. (STNG - Free Report) , Teekay Tankers Ltd. (TNK - Free Report) and Nordic American Tankers Limited (NAT - Free Report) . All the stocks carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.

The Zacks Consensus Estimate for Scorpio Tankers’ current-year earnings has been revised upward in excess of 100% in the past 60 days.

The Zacks Consensus Estimate for Teekay Tanker’s current-year earnings has been revised upward by 35.6% in the past 60 days.

The Zacks Consensus Estimate for Nordic American Tankers’ current-year earnings has been revised upward by 14.1% in the past 60 days.

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