ZTO Express’ (ZTO) top line continues to benefit from the upbeat performance of its core express delivery services segment. Shares of ZTO have gained 6.8% over the past six months against the 2.6% loss of the industry it belongs to.
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Recently, the company reported first-quarter 2023 earnings of 34 cents per share, beating the Zacks Consensus Estimate of 24 cents and improving year over year. Total revenues of $1,308.1 million missed the Zacks Consensus Estimate of $1,379.3 million. However, the top line improved year over year, owing to a rise in revenues at the core express delivery services unit (contributing 93.4% to the top line).
How is ZTO Express Doing?
Strength across 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 volumes on the back of rapid growth in the e-commerce business in recent times. Market share of parcel volume grew by 1.8 points to 23.4% in the reported quarter. ZTO Express now expects 2023 parcel volumes in the range of 29.27-30.24 billion (prior view: 28.78-29.75 billion). The updated guidance indicates an increase of 20-24% year over year.
ZTO Express’ consistent initiatives to reward its shareholders look encouraging. As of Mar 31, 2023, 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.
However, higher selling, general & administrative (SG&A) expenses might increase operating expenses and affect the bottom line. Apart from other factors, increases in compensation, benefits and office expenditures 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.
Zacks Rank and Stocks to Consider
Currently, ZTO Express carries a Zacks Rank #3 (Hold).
Some better-ranked stocks for investors interested in the Zacks Transportation sector are Copa Holdings, S.A. CPA and Allegiant Travel Company ALGT. Each of these companies presently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Copa Holdings has an expected earnings growth rate of 75.42% for the current year. CPA delivered a trailing four-quarter earnings surprise of 14.60%, on average.
The Zacks Consensus Estimate for CPA’s current-year earnings has improved 25.5% over the past 90 days. Shares of CPA have soared 19.3% over the past three months.
Allegiant has an expected earnings growth rate of more than 100% for the current year. ALGT delivered a trailing four-quarter earnings surprise of 79.78%, on average.
The Zacks Consensus Estimate for ALGT’s current-year earnings has improved 46.5% over the past 90 days. Shares of ALGT have soared 13.6% over the past three months.
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