Yahoo Finance Here's Why Investors Should Retain ZTO Express (ZTO) Stock
ZTO Express’ ZTO robust performance of express delivery services is boosting its top line. However, the company is grappling with elevated operating expenses, which is severely impacting ZTO’s bottom line.
Factors Favoring ZTO
Parcel volume growth is a big tailwind for ZTO Express. As evidence, in the first quarter of 2024, the parcel volume rose by 13.9% year over year, and the parcel unit price decreased by 2.5% year over year.This contributed to an 11% increase in revenues from the core express delivery services unit, thereby boosting ZTO’s top line. The company expects parcel volumes to increase by 15%-18% year over year in 2024.
The overall unit cost for ZTO Express’Core Express delivery business decreased by 5.3% year over year in the first quarter of 2024. This reduction was driven by a 7% fall in line-haul transportation costs per parcel, supported by improved resource use and route planning. Moreover, unit sorting costs decreased by 5.4%, reflecting ongoing efficiency improvements in sortation procedures, labor and automation.
ZTO's commitment to rewarding shareholders despite current uncertainties is commendable. By the end of the fourth quarter of 2023, ZTO Express repurchased 42,501,325 ADS for $1.06 billion, including commissions. With $437 million remaining under its share repurchase program, the company has increased the repurchase value from $1.5 billion to $2 billion and extended the program to Jun 30, 2025.
Key Risks
The northward movement in operating expenses is adversely impacting ZTO Express’bottom line, challenging its financial stability. In the first quarter of 2024, total operating expenses rose by 28.3% year over year.
In the first quarter of 2024, Selling, general and administrative expenses escalated by 14% year over year, amounting toRMB896.6 million (US$124.2 million). This escalation was primarily driven by a RMB40.4 million (US$5.6 million) increase in labor costs, including compensation and benefit expenses, and a RMB37.3 million (US$5.2 million) provisional loss related to a collection issue with a certain supplier.
Shares of ZTO Expresshave declined 16.9% in the past year compared with its industry’s fall of 9.4% in the same period.
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Zacks Rank
Currently, ZTO carries a Zacks Rank #3 (Hold).
Stocks to Consider
Some better-ranked stocks for investors’ consideration in the Zacks Transportationsector include SkyWest SKYW and Kirby Corporation KEX.
SkyWest currently carries a Zacks Rank #2 (Buy) and has an expected earnings growth rate of 787% for the current year.
SKYW has an impressive earnings surprise history. Its earnings outpaced the Zacks Consensus Estimate in each of the trailing four quarters, delivering an average surprise of 128%. Shares of SkyWest have jumped 103.3% in the past year.
KEX sports a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.Kirbyhas an expected earnings growth rate of 42.5% for the current year.
The company has an encouraging track record with respect to the earnings surprise, having surpassed the Zacks Consensus Estimate in each of the trailing four quarters. The average beat is 10.3%. Shares of Kirby have climbed 59.9% in the past year.
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SkyWest, Inc. (SKYW) : Free Stock Analysis Report
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ZTO Express (Cayman) Inc. (ZTO) : Free Stock Analysis Report
