Summary of ZTO Express 4Q25 Preview Conference Call Company Overview - **Company**: ZTO Express (ZTO.N) - **Industry**: Transportation & Infrastructure - **Market**: Hong Kong/China Key Points Earnings Outlook - The earnings outlook for 4Q25 remains largely unchanged compared to the management discussion post-3Q25 [1] - ZTO is expected to achieve a net profit of approximately Rmb2.7 billion, which is flat year-over-year [3] Market Share Dynamics - ZTO is projected to gain 1 percentage point in market share in 4Q25, recovering from a loss of 0.6 percentage points in 3Q25 and 0.3 percentage points in 1H25 [2] - Industry volume growth is anticipated to slow from 13% in 3Q25 to 5% year-over-year in 4Q25, attributed to decreased low-value parcels and a high base from the previous year [2] - ZTO's market share gains resumed in October 2025, leading to a 1 percentage point year-over-year gain in 4Q25 [2] Profitability Metrics - Unit operating profit is expected to improve by Rmb0.05 quarter-over-quarter to Rmb0.30 in 4Q25, despite a slight increase in unit costs during the peak season [3] - The unit profit is projected to remain stable at Rmb0.26, with higher operating profit offset by lower tax credits [3] 2026 Outlook - The outlook for 2026 indicates continued market share gains for ZTO, with manageable downside risks to unit profit [4] Investment Recommendation - The recommendation for ZTO remains "Overweight" (OW), with sustained market share gains being a key focus for investors [5] - The stock is currently trading at a price-to-earnings (P/E) ratio of 12x for 2026 estimates, with a forward free cash flow yield of 6-8%, which is attractive compared to the peer average of 1% [5] - A reduction in capital expenditures is expected to enhance shareholder returns [5] Valuation and Risks - The valuation methodology includes a discounted cash flow approach with a probability-weighted scenario analysis: 15% bull case, 75% base case, and 10% bear case [12] - Key assumptions include a weighted average cost of capital (WACC) of 13.2% and a terminal growth rate of 3% [13] - Upside risks include faster-than-expected market share gains and better cost control, while downside risks involve intensified competition and potential market share losses [15] Financial Metrics - Current market capitalization is Rmb119.7 billion, with an enterprise value of Rmb108.1 billion [7] - Earnings per share (EPS) estimates for the next fiscal years are Rmb11.76 for 2025 and Rmb12.93 for 2026 [7] Additional Insights - The company is positioned to achieve approximately 10% year-over-year profit growth in 2026 under the base case scenario [10] - The bear case scenario suggests potential challenges in achieving both earnings growth and market share gains [10] This summary encapsulates the critical insights from the ZTO Express conference call, highlighting the company's performance, market dynamics, and investment outlook.

Core Insights - ZTO Express Cayman (ZTO) shares have surged 11.4% over the past three months, outperforming the Zacks Transportation sector's 9% rise [1][7] Company Performance - ZTO's growth is driven by the broader momentum in China's express delivery sector, with national parcel volumes exceeding 150 billion, indicating strong consumer demand and an improving economy [4] - The company reported a 9.8% year-over-year increase in parcel volumes for Q3 2025, with revenues from its core express delivery services unit rising 11.6% year over year [5][7] - ZTO expects parcel volume for 2025 to reach between 38.2 billion and 38.7 billion, reflecting a solid year-over-year growth of 12.3% to 13.8% [5] Financial Stability - ZTO's current ratio improved from 0.96 in Q3 2024 to 1.38 in Q3 2025, indicating enhanced financial stability and the ability to meet short-term obligations [6] Market Outlook - The Zacks Consensus Estimate for full-year 2025 and 2026 has been revised upward by 9.2% and 10.1% respectively over the past 60 days, reflecting positive market sentiment [8]

Core Insights - Deep-pocketed investors are showing a bullish sentiment towards FedEx, indicating potential significant developments ahead [1] - The options activity for FedEx is unusually high, with 45% of investors leaning bullish and 36% bearish [2] Options Activity - A total of 11 extraordinary options activities were recorded for FedEx, with notable put and call volumes [2] - The put options totaled $405,795 while call options amounted to $165,726, reflecting a mixed sentiment among investors [2] - Whales have targeted a price range for FedEx between $250.0 and $310.0 over the last three months based on volume and open interest [3] Volume & Open Interest Trends - Insights into volume and open interest are crucial for understanding liquidity and interest levels in FedEx's options [4] - A snapshot of trends in volume and open interest for calls and puts indicates significant trading activity within the $250.0 to $310.0 strike price range [4] Current Market Position - FedEx's Federal Express segment accounted for 86% of total revenue in fiscal 2025, with the remainder coming from FedEx Freight and other services [8] - Recent expert ratings suggest an average target price of $305.6 for FedEx, with various analysts maintaining differing ratings and target prices ranging from $210 to $345 [10][12]

Core Viewpoint - FedEx Corporation (NYSE:FDX) is undergoing a significant turnaround, with recent earnings exceeding analyst expectations, indicating positive momentum for the company [2]. Financial Performance - FedEx reported $23.5 billion in revenue and $4.82 in earnings per share for the fiscal second quarter, surpassing analyst estimates of $22.8 billion and $4.12 respectively [2]. - Following the earnings report, BMO Capital raised the share price target for FedEx from $265 to $290 while maintaining a Market Perform rating [2]. Business Strategy - The CEO of FedEx, Raj Subramanian, emphasized the strength of the business-to-business segment and the healthcare vertical, which has significant growth potential, estimating healthcare could reach $40 billion [3]. - FedEx experienced a strong Black Friday performance, and although there was a subsequent decline, business has rebounded [3]. Market Sentiment - Since Jim Cramer's positive comments on December 19th, FedEx shares have increased by 2.2% [2].

Economic News - The Ministry of Finance and the Ministry of Industry and Information Technology issued opinions on implementing the notification regarding domestic product standards in government procurement, emphasizing equal treatment for domestic and foreign enterprises [1] - The National People's Congress further supports the development of digital and green trade in the revised draft of the Foreign Trade Law, promoting the construction of a cross-border financial service system [1] - The People's Bank of China conducted a 673 billion yuan reverse repurchase operation with an interest rate of 1.40%, maintaining the previous level [1] - The Audit Office reported that 10.335 billion yuan related to issues found in the 2024 central budget execution and other financial audits has been rectified [1] - The Ministry of Commerce responded to the ASML semiconductor issue, urging for internal dispute resolution and reiterating that the root cause lies in improper administrative intervention by the Dutch government [1] Important Company Information - Sanhua Intelligent Control expects a net profit of 3.874 billion to 4.649 billion yuan for the fiscal year 2025, representing a year-on-year growth of 25% to 50% [2] - Weisi Medical plans to sell a property and related fixed assets in Nanjing for a total price of 119 million yuan, which is expected to have no impact on the company's revenue and net profit for 2025 [2] - Ningbo Huaxiang's subsidiary signed a strategic cooperation agreement with Shenzhen Dahuan Robot Technology Co., focusing on the development and sales of general humanoid robot dexterous hands [4] - Tongyu Communication's subsidiary plans to introduce investors through a capital increase, raising 10 million yuan to enhance its capital strength for satellite communication product development [4] - EVE Energy held a groundbreaking ceremony for its "EVE Sodium Energy Headquarters and Jinyuan Robot AI Center" project [4] Industry Outlook - The computer industry is expected to focus on the "fundamentals, cost-effectiveness, and attractiveness" framework for investment, with AI remaining the core theme driven by policy support, technological evolution, and demand release [6] - The global demand for AI computing resources is projected to grow significantly, with the domestic intelligent computing center resource demand expected to increase from 2016 MW in 2024 to 9480 MW in 2027, representing a CAGR of 67.5% [6] - Despite the overall high valuation of the sector, certain segments such as domestic computing and specific digitalization fields are expected to offer better cost-effectiveness [6] - The investment strategy emphasizes focusing on AI-related sectors, including domestic AI chips, AI servers, and intelligent computing services, while also considering emerging industries like quantum technology and low-altitude economy [7][8]

Core Insights - The broader equity markets experienced a mini recovery, ending a four-day losing streak, driven by cooling inflation and strong performances from key blue-chip stocks [1][2] - The November consumer price index report indicated an annual inflation increase of 2.7%, lower than the expected 3.1%, while core consumer price inflation was at 2.6%, compared to a forecast of 3% [1] Investment Opportunities - Investors are encouraged to focus on "cash cow" stocks with high return on equity (ROE) to maximize returns, as high ROE indicates effective reinvestment of cash [2][3] - TE Connectivity plc (TEL), ZTO Express (Cayman) Inc. (ZTO), Pilgrim's Pride Corporation (PPC), Assurant, Inc. (AIZ), and Host Hotels & Resorts, Inc. (HST) are highlighted as stocks with high ROE and favorable efficiency scores [2][7] Financial Metrics - ROE is defined as Net Income divided by Shareholders' Equity, serving as a key indicator of a company's profitability and financial health [3] - A higher ROE signifies better management efficiency in generating profits without new equity capital [4] Screening Parameters - Stocks were screened based on criteria including cash flow greater than $1 billion, ROE greater than the industry average, price/cash flow ratio lower than the industry average, return on assets (ROA) greater than the industry average, and a 5-year EPS historical growth greater than the industry average [5][6][7] - Zacks Rank of 1 (Strong Buy) or 2 (Buy) was also considered, indicating stocks likely to outperform the market [7] Company Profiles - **TE Connectivity**: A global technology company focused on connectivity and sensor solutions, with a long-term earnings growth expectation of 12.3% and a trailing four-quarter earnings surprise of 6.5% [8][9] - **ZTO Express**: A leading express delivery service in China, with a Zacks Rank of 1 and a long-term earnings growth expectation of 3.1% [10][11] - **Pilgrim's Pride**: Engaged in the production and distribution of chicken products, with a trailing four-quarter earnings surprise of 10.4% and a Zacks Rank of 2 [11][12] - **Assurant**: A provider of risk management solutions, with a trailing four-quarter earnings surprise of 22.7% and a Zacks Rank of 2 [12][13] - **Host Hotels**: A leading lodging REIT with a trailing four-quarter earnings surprise of 11% and a Zacks Rank of 2 [14][15]

Financial Performance - FedEx reported second-quarter revenue of $23.5 billion, exceeding analyst estimates of $22.79 billion [1] - The company posted adjusted earnings of $4.82 per share, surpassing estimates of $4.11 per share [1] Guidance Update - FedEx raised its fiscal 2026 revenue growth expectation to 5% to 6%, up from the previous guidance of 4% to 6% [2] - The low end of adjusted earnings guidance was increased from a range of $17.20 to $19 per share to a new range of $17.80 to $19 per share, compared to estimates of $18.22 per share [3] Analyst Ratings and Price Targets - B of A Securities raised the price target for FedEx from $285 to $315 while maintaining a Neutral rating [4] - Wells Fargo increased its price target from $290 to $295 with an Equal-Weight rating [4] - Stifel raised its price target from $305 to $328 while maintaining a Buy rating [4] - Jefferies increased its price target from $315 to $326 while maintaining a Buy rating [4] - JP Morgan raised its price target from $285 to $294 while maintaining a Neutral rating [4] - BMO Capital increased its price target from $265 to $290 while maintaining a Market Perform rating [4]

Financial Performance - FedEx reported second-quarter revenue of $23.5 billion, exceeding analyst estimates of $22.79 billion [1] - The company posted adjusted earnings of $4.82 per share, surpassing estimates of $4.11 per share [1] Guidance Update - FedEx raised its fiscal 2026 revenue growth expectation to 5% to 6%, up from the previous guidance of 4% to 6% [2] - The low end of adjusted earnings guidance was increased from a range of $17.20 to $19 per share to a new range of $17.80 to $19 per share, compared to estimates of $18.22 per share [3] Analyst Ratings and Price Targets - B of A Securities raised the price target for FedEx from $285 to $315 while maintaining a Neutral rating [4] - Wells Fargo increased its price target from $290 to $295 with an Equal-Weight rating [4] - Stifel raised its price target from $305 to $328 while maintaining a Buy rating [4] - Jefferies increased its price target from $315 to $326 while maintaining a Buy rating [4] - JP Morgan raised its price target from $285 to $294 while maintaining a Neutral rating [4] - BMO Capital increased its price target from $265 to $290 while maintaining a Market Perform rating [4]

Core Insights - ZTO Express (Cayman) Inc. shares have increased by approximately 13% since the last earnings report, outperforming the S&P 500 [1] Recent Earnings Report - For Q3 2025, ZTO Express reported earnings of 43 cents per share, an improvement from the previous year, with total revenues reaching $1.66 billion, also up year over year [3] - The company has revised its 2025 parcel volume guidance down to 38.2 billion to 38.7 billion, reflecting a year-over-year growth of 12.3-13.8%, compared to the previous guidance of 38.8 billion to 40.1 billion, which indicated a growth of 14-18% [3] Operational Performance - Revenue from the core express delivery business increased by 11.6% year over year, driven by a 9.8% growth in parcel volume and a 1.7% increase in parcel unit price [4] - Key account revenues surged by 141.2% year over year due to an increase in e-commerce return parcels [4] - Revenue from freight forwarding services declined by 7.4% year over year [4] Financial Metrics - Revenue from accessory sales, primarily digital thermal paper waybills, rose by 0.5% year over year [5] - Gross profit decreased by 11.4% from the previous year, with the gross margin rate falling to 24.9% from 31.2% [5] - Total operating expenses were RMB550.9 million (approximately $77.4 million), up from RMB493.0 million in the prior year [5] Share Repurchase Program - ZTO's board approved a share repurchase program with an increased aggregate value of $2.0 billion, effective through June 30, 2026 [6] - As of September 30, 2025, ZTO had repurchased 52,919,506 ADSs for $1.3 billion, leaving $0.7 billion available under the program [6] Cash Position - At the end of Q3 2025, ZTO Express had cash and cash equivalents of $1.31 billion, down from $1.85 billion at the end of the previous quarter [7] Analyst Sentiment - Analysts have not made any earnings estimate revisions in the last two months [8] VGM Scores - ZTO Express has a subpar Growth Score of D, a strong Momentum Score of A, and a Value Score of B, resulting in an aggregate VGM Score of C [9] Outlook - ZTO Express holds a Zacks Rank of 1 (Strong Buy), indicating expectations for above-average returns in the coming months [10]

Core Insights - The quarter has shown strong performance for FedEx, driven by effective cost-cutting measures and revenue growth [1][3] - FedEx has implemented a structural cost reduction program, achieving $4 billion in savings over the last three years, with a target of $1 billion for the current year [2] - The company is experiencing growth in key verticals such as healthcare, aerospace, defense, and data centers, particularly in relation to AI investments [4] Financial Performance - FedEx's revenue growth is highlighted as a critical aspect of the quarter, emphasizing its role as a key player in the industrial economy [3] - The company has successfully executed its long-term plans, leading to improved operational performance [4] Strategic Focus - FedEx is concentrating on differentiation and providing new value to customers, which is essential for maintaining its competitive edge [3] - The company is winning market share in various sectors, indicating a positive trajectory in its strategic initiatives [4]