Critical Review: FedEx (NYSE:FDX) versus ZTO Express (Cayman) (NYSE:ZTO)

FedEx (NYSE:FDX) and ZTO Express (Cayman) (NYSE:ZTO) are both large-cap industrials companies, but which is the superior investment? We will compare the two businesses based on the strength of their profitability, dividends, valuation, earnings, analyst recommendations, risk and institutional ownership.

Volatility and Risk

FedEx has a beta of 1.3, meaning that its stock price is 30% more volatile than the S&P 500. Comparatively, ZTO Express (Cayman) has a beta of -0.22, meaning that its stock price is 122% less volatile than the S&P 500.

Institutional & Insider Ownership

84.5% of FedEx shares are held by institutional investors. Comparatively, 41.6% of ZTO Express (Cayman) shares are held by institutional investors. 0.7% of FedEx shares are held by insiders. Comparatively, 41.3% of ZTO Express (Cayman) shares are held by insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a stock is poised for long-term growth.

Dividends

FedEx pays an annual dividend of $4.88 per share and has a dividend yield of 1.5%. ZTO Express (Cayman) pays an annual dividend of $0.76 per share and has a dividend yield of 3.6%. FedEx pays out 26.4% of its earnings in the form of a dividend. ZTO Express (Cayman) pays out 40.9% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. FedEx has increased its dividend for 1 consecutive years.

Profitability

This table compares FedEx and ZTO Express (Cayman)’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
FedEx	4.68%	16.49%	5.21%
ZTO Express (Cayman)	19.03%	15.90%	10.89%

Analyst Recommendations

This is a breakdown of current ratings and recommmendations for FedEx and ZTO Express (Cayman), as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
FedEx	2	9	18	1	2.60
ZTO Express (Cayman)	0	2	2	1	2.80

FedEx presently has a consensus target price of $350.54, indicating a potential upside of 5.76%. ZTO Express (Cayman) has a consensus target price of $29.55, indicating a potential upside of 39.23%. Given ZTO Express (Cayman)’s stronger consensus rating and higher possible upside, analysts plainly believe ZTO Express (Cayman) is more favorable than FedEx.

Valuation & Earnings

This table compares FedEx and ZTO Express (Cayman)”s gross revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
FedEx	$94.72 billion	0.83	$4.43 billion	$18.51	17.91
ZTO Express (Cayman)	$7.02 billion	1.68	$1.30 billion	$1.86	11.41

FedEx has higher revenue and earnings than ZTO Express (Cayman). ZTO Express (Cayman) is trading at a lower price-to-earnings ratio than FedEx, indicating that it is currently the more affordable of the two stocks.

Summary

FedEx beats ZTO Express (Cayman) on 10 of the 17 factors compared between the two stocks.

About FedEx

FedEx Corporation provides transportation, e-commerce, and business services in the United States and internationally. It operates through FedEx Express, FedEx Ground, FedEx Freight, and FedEx Services segments. The FedEx Express segment offers express transportation, small-package ground delivery, and freight transportation services; and time-critical transportation services. The FedEx Ground segment provides small-package ground delivery services. The FedEx Freight segment offers less-than-truckload freight transportation services. The FedEx Services segment provides sales, marketing, information technology, communications, customer service, technical support, billing and collection, and back-office support services. In addition, the company offers supply chain management solutions; and air and ocean cargo transportation, specialty transportation, customs brokerage, and trade management tools and data. The company was founded in 1971 and is headquartered in Memphis, Tennessee.

About ZTO Express (Cayman)

ZTO Express (Cayman) Inc. provides express delivery and other value-added logistics services in the People's Republic of China. It offers freight forwarding services; and delivery services for e-commerce and traditional merchants, and other express service users. The company was founded in 2002 and is headquartered in Shanghai, the People's Republic of China.