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Why Shares of ZTO Express Are Skyrocketing Today

By Scott Levine – Nov 18, 2021 at 12:29PM

Key Points

  • The company met Q3 2021 revenue expectations but beat on the bottom line.
  • Wall Street sees upside to the stock.

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Improvements to the company's trucking fleet are helping the company's bottom line.

What happened

Giving back of some of the 20.8% gain that they enjoyed earlier in the trading session, shares of ZTO Express (ZTO -1.75%) are still up significantly today. As of 11:38 a.m. ET, shares of the Chinese logistics company are up 10.3%.

Besides Wall Street's positive commentary on the stock, investors are picking up shares in response to the surprisingly strong third-quarter earnings report that the company released yesterday after the bell.

A flag of China affixed to a container being loaded onto a cargo plane.

Image source: Getty Images.

So what

ZTO Express met analysts' top-line estimates, reporting 7.39 billion renminbi for Q3 2021, but it narrowly beat expectations on the bottom line, to the delight of investors. Whereas analysts expected the company to book earnings of 1.42 renminbi per share, it reported 1.43 renminbi per share.

Looking beyond the headline figures, however, investors found more to celebrate. Thanks in part to higher sales volumes, the company expanded its gross margin from 21% in Q3 2020 to 21.2% in the recently completed quarter. The cash flow statement provided further cause for excitement: ZTO Express reported operating cash flow of 1.79 billion renminbi, representing a 21% year-over-year increase.

On the strength of the company's earnings report, analysts assumed a more bullish stance on the stock. Fan Tso, an analyst at Bank of America, upgraded the stock to buy from neutral, raising the price target to $36 from $31. Additionally, Ellie Jiang, an analyst at Macquarie, upgraded the stock to outperform from neutral and set a price target of $40.20.

Now what

Despite the stock's rise today, there's still room for it to run higher according to analysts from Bank of America and Macquarie. Despite these optimistic takes on the stock, it's important for investors to remember that Wall Street oftentimes has a shorter investing horizon than the multiyear holding periods that we favor. Consequently, investors should dig deeper before picking up shares of ZTO Express.


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