Yahoo Finance ZTO Express (ZTO) Gains From Parcel Volumes Despite High Costs
ZTO Express (Cayman) Inc. ZTO is benefiting from its core express delivery services unit and shareholder-friendly measures. However, escalating operating expenses are worrisome.
The strong performance of the core express delivery services unit is encouraging. Notably, revenues from the unit increased 16.1% year over year in first-quarter 2023. The uptick was driven by a 20.5% increase in parcel volume on the back of rapid growth in the e-commerce business in recent times. Market share of parcel volume grew 1.8 points to 23.4% in the reported quarter.
ZTO Express expects 2023 parcel volume of 29.27-30.24 billion (prior view: 28.78-29.75 billion). The updated guidance indicates a year-over-year increase of 20-24%.
We are impressed with ZTO Express’ efforts to reward its shareholders even in the present uncertain scenario. As of Mar 31, ZTO Express purchased 38,250,449 ADSs at an average purchase price of $25.18, including repurchase commissions.
The company’s board of directors has further approved changes to its existing share repurchase program, increasing the value of shares to be repurchased from $1 billion to $1.5 billion and extending the effective time by one year through Jun 30, 2024. ZTO anticipates funding the repurchases from its existing cash balance.
On the flip side, rising selling general and administrative (SG&A) expenses may raise operating expenses and affect the bottom line. Apart from other factors, increases in compensation, benefits and office expenditure are leading to higher SG&A expenses. In first-quarter 2023, SG&A expenses increased 27.2% due to a rise in compensation and benefits.
Shares of ZTO Express have gained 14.5% over the past year against a 0.4% fall of the industry it belongs to.
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Zacks Rank & Stocks to Consider
ZTO Express currently carries a Zacks Rank #4 (Sell).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Some better-ranked stocks in the Zacks Transportation sector are Copa Holdings, S.A. CPA and Alaska Air Group ALK.
Copa Holdings, which currently sports a Zacks Rank #1, is being aided by the improved air-travel-demand situation. Management expects current-year load factor (percentage of seats filled by passengers) to be 85%, assuming the rosy traffic scenario to continue.
For the second quarter and 2023, CPA’s earnings are expected to register 669% and 65% growth, respectively, on a year-over-year basis.
Alaska Air Group, currently carrying a Zacks Rank #2 (Buy), benefits from the improved air-travel-demand situation. On the back of upbeat air-travel demand and favorable pricing, Alaska Air's top line increased 31% year over year in the March-end quarter. ALK expects to boost its fleet and workforce in 2023 to meet the anticipated high demand.
For the second quarter and 2023, ALK’s earnings are expected to register 12% and 44.8% improvements, respectively, on a year-over-year basis.
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