On Wednesday, Jefferies updated its outlook on ZTO Express (NYSE:ZTO) shares, increasing the price target to $27 from the previous $26 while maintaining a Buy rating on the stock.
ZTO Express, a prominent player in the delivery services sector, recently disclosed its second-quarter financial results, which aligned with market expectations and surpassed forecasts set by Jefferies.
The company's Average Selling Price (ASP) remained steady year-over-year in the second quarter. This stability is attributed to the growth in non-e-commerce parcel volume. Moreover, ZTO Express experienced a more significant reduction in transportation and sortation costs per parcel than anticipated.
During the earnings conference call, management emphasized the importance of quality, scale, and profitability for the company, even in the face of competitive pricing pressures in the market. They also reaffirmed their commitment to achieving full-year parcel volume growth in the range of 15% to 18% year-over-year.
The financial performance of ZTO Express in the second quarter, coupled with the management's confidence in maintaining growth and profitability, underpins Jefferies' decision to adjust the price target and uphold a positive outlook on the company's shares. The new price target reflects a modest increase but signifies continued confidence in the company's trajectory.
In other recent news, ZTO Express (Cayman) Inc. reported its second-quarter earnings, which exceeded analyst expectations. The company's adjusted earnings per American depositary share (ADS) were RMB3.38 ($0.47), surpassing the analyst estimate of RMB3.12.
Revenue for the quarter reached RMB10.73 billion ($1.48 billion), slightly above the consensus estimate of RMB10.67 billion, representing a 10.1% increase year-over-year.
ZTO Express also reported a 10.1% year-over-year increase in parcel volume to 8,452 million parcels. The adjusted net income rose by 10.9% to RMB2.81 billion ($386.1 million). Despite these positive developments, the company's market share decreased by 2.0 to 19.6%.
As stated by Meisong Lai, founder, chairman, and CEO of ZTO Express, the company continues to implement its strategy that prioritizes quality over quantity. The firm maintains its 2024 volume growth guidance of 15% to 18% and aims to double its retail volume by year-end.
According to Jefferies analysts, the company's parcel volume is expected to grow by about 15% year over year, and adjusted earnings are expected to exceed RMB10 billion. These are among the recent developments for ZTO Express.
InvestingPro Insights
Following Jefferies' updated outlook on ZTO Express, a review of recent InvestingPro Data shows that ZTO holds a market capitalization of $15.88 billion, with a Price/Earnings (P/E) ratio standing at 14.4, which adjusts to 12.63 when considering the last twelve months as of Q1 2024. This P/E ratio positions ZTO as trading at a low earnings multiple, as highlighted by one of the InvestingPro Tips. Additionally, ZTO's revenue growth for the same period was a robust 8.06%, demonstrating the company's ability to expand its financial base in a competitive market.
InvestingPro Tips further suggest that ZTO Express is a prominent player in the Air Freight & Logistics industry and has maintained dividend payments for 7 consecutive years, with a notable dividend yield of 3.08% as of the latest data. This consistent return to shareholders is a testament to the company's financial stability and management's commitment to shareholder value. Moreover, analysts predict that ZTO will be profitable this year, reinforcing the positive sentiment shared by Jefferies.
For investors looking to delve deeper into ZTO's financial health and future prospects, additional InvestingPro Tips are available on the platform, offering a comprehensive analysis of the company's performance and market position. Visit InvestingPro for more insights and tips on ZTO Express.
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