On Tuesday, Morgan Stanley reaffirmed its Overweight stock rating on ZTO Express (NYSE:ZTO), with a steady price target of $24.50. The firm anticipates that the upcoming declaration of ZTO's fourth quarter 2023 results and annual dividend could serve as a catalyst for the company's share price.
The report is expected to be released on March 19 after the close of US Eastern Time markets, corresponding to the morning of March 20 in Hong Kong Time.
The analyst at Morgan Stanley predicts that ZTO Express may announce an increase in its dividend payout ratio for 2023, which could positively influence the company's stock. This expectation is based on ZTO's enhanced free cash flow and a slowdown in capital expenditure growth, which may allow the company to focus more on improving shareholder returns.
The firm outlined three potential scenarios regarding ZTO's dividend payout ratio. The first scenario maintains the payout ratio at 30%, unchanged from 2022. The second scenario increases the payout to 35%, and the third scenario proposes a range between 35-45%.
The implications for ZTO's stock price vary with each scenario. If the payout remains the same, there could be a 0-5% decrease in share price. A payout of 35% could lead to a 0-5% increase, while a payout in the 35-45% range could result in a 5-10% uptick in the share price.
Morgan Stanley has identified the second scenario as its base case, assigning a 65% probability to it. The firm's outlook suggests that an increased focus on shareholder returns, especially through dividend payouts, is a positive move for ZTO Express, particularly in the context of the company's current financial performance.
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