LKQ’s Third-Quarter Results Impacted by Foreign Exchange Headwinds in Europe

Narrow-moat LKQ reported third-quarter results slightly below our expectations, leading us to decrease our fair value estimate to $45.50 from $47 previously. We brought down our 2022 and 2023 estimates to reflect the near-term headwinds. Supply chains continue to be challenged across the industrial landscape. That said, the operating environment has started to improve sequentially. The main callout by management was the currency headwind in Europe. LKQ’s sales declined to $3.1 billion in the third quarter, down 5.9% year on year. Revenues were mainly brought down by FX rates (690-basis point impact) and divestitures (210-basis point headwind). On a constant currency basis, the company’s sales increased by 1.0% year on year.