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BEST Faces Challenges Against Increasingly Competitive Landscape, KeyBanc Says

BEST Faces Challenges Against Increasingly Competitive Landscape, KeyBanc Says

BEST Inc (NYSE: BEST) reported disappointing results for the second quarter, amid stiffening competition.

The company has missed earnings expectations for six of the last eight quarters and needs to improve its execution to meet targets in all business segments, according to KeyBanc Capital Markets.

The Analyst

KeyBanc’s Hans Chung downgraded the rating on BEST from Overweight to Sector Weight.

The Thesis

BEST’s second-quarter miss was driven by price declines in its core Express segment and the weak performance of its Store+ and Supply Chain Management business, Chung said in the downgrade note.

Although BEST can achieve faster cost reduction than its peers, its businesses are diversified, which makes it difficult for the company to execute well in each market segment, the analyst mentioned.

The company reported second-quarter revenue of 8.79 billion yuan, missing the consensus estimate of 8.88 billion yuan, with all segments missing revenue expectations. Gross margin was also disappointing, coming in at 5.9%. Adjusted EBITDA was reported at 148.2 million yuan, versus the Street's 218.9 million estimate.

Express recorded 5.45 billion in revenues. Chung noted, however, that the stronger-than-expected volume growth in this segment was more than offset by price declines due to higher competitive pressure.

“Given an increasingly competitive market and lack of track record in meeting expectations, we are lowering estimates,” the analyst wrote. He reduced the revenue and adjusted EBITDA estimates for 2019 from 37.3 billion yuan to 36.5 billion yuan and from 704 million yuan to 569 million yuan, respectively.

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Latest Ratings for BEST

Aug 2019DowngradesOverweightSector Weight
May 2019MaintainsOverweight

View More Analyst Ratings for BEST
View the Latest Analyst Ratings

Posted-In: Hans Chung KeyBanc Capital MarketsAnalyst Color Earnings News Downgrades Analyst Ratings


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