Company Reports

LKQ guided to weaker first-quarter earnings, but the demand environment turned out to be lower than management had expected. This led the company to lower 2024 sales and EPS guidance. Organic revenue growth expectations were reduced to 2.5%-4.5% from 3.5%-5.5% previously. Diluted EPS is now expected to be between $3.32-$3.62 versus $3.43-$3.73 before. Following the earnings update, the market sent LKQ’s shares down approximately 14% in intraday trading.

LKQ is the top alternative vehicle-parts provider to repair shops in North America and Europe. We believe the company benefits from scale-driven cost advantages in its business. Customers value LKQ’s consistent parts availability across a wide range of products and quick delivery. LKQ helps customers complete repairs faster, improving productivity. We think the company’s strong distribution network will support its ability to keep order fulfillment rates high in both aftermarket and salvage products.

LKQ reported solid fourth-quarter earnings to close out 2023. On an organic basis, sales in the parts and services business grew nearly 3% year over year, while total revenue increased nearly 2% compared with the same period a year ago (includes other revenue). Sales increased in both North America and Europe, which were up roughly 5% and 4%, respectively, in the quarter.

LKQ is the top alternative vehicle-parts provider to repair shops in North America and Europe. We believe the company benefits from scale-driven cost advantages in its business. Customers value LKQ’s consistent parts availability across a wide range of products and quick delivery. LKQ helps customers complete repairs faster, improving productivity. We think the company’s strong distribution network will support its ability to keep order fulfillment rates high in both aftermarket and salvage products.

LKQ is the top alternative vehicle-parts provider to repair shops in North America and Europe. We believe the company benefits from scale-driven cost advantages in its business. Customers value LKQ’s consistent parts availability across a wide range of products and quick delivery. LKQ helps customers complete repairs faster, improving productivity. We think the company’s strong distribution network will support its ability to keep order fulfillment rates high in both aftermarket and salvage products.

LKQ reported mixed third-quarter results due to profitability challenges. EBITDA margins were down across all segments. In North America, EBITDA margin contracted 240 basis points. The inclusion of Uni-Select’s financials had a 180-basis-point negative impact, since the acquired firm's products have lower margins than LKQ’s North American products. In Europe, EBITDA margin was down 200 basis points due to a nonrecurring tax charge (70 basis points), labor strike in Germany (40 basis points), and growing customer price sensitivity (90 basis points).

LKQ is the top alternative vehicle-parts provider to repair shops in North America and Europe. We believe the company benefits from scale-driven cost advantages in its business. Customers value LKQ’s consistent parts availability across a wide range of products and quick delivery. LKQ helps customers complete repairs faster, improving productivity. We think the company’s strong distribution network will support its ability to keep order fulfillment rates high in both aftermarket and salvage products.

We elected to leave our fair value estimate of $46.50 for LKQ unchanged, following second-quarter earnings. We expect near-term demand to remain solid for the balance of the year. In North America, LKQ increased sales by nearly 5% year on year, thanks to stronger pricing (offset cost inflation). The company maintains that supply chains continue to improve, driving gains in aftermarket collision parts volume. Sales in Europe were up nearly 11% year on year, thanks to solid pricing. The growth in vehicle miles driven in Europe isn’t as high as it is in North America, but it’s still growing, supporting parts and services demand.

LKQ is the top alternative vehicle-parts provider to repair shops in North America and Europe. We believe the company benefits from scale-driven cost advantages in its business. Customers value LKQ’s consistent parts availability across a wide range of products and quick delivery. LKQ helps customers complete repairs faster, improving productivity. We think the company’s strong distribution network will support its ability to keep order fulfillment rates high in both aftermarket and salvage products.

LKQ is the top alternative vehicle-parts provider to repair shops in North America and Europe. We believe the company benefits from scale-driven cost advantages in its business. Customers value LKQ’s consistent parts availability across a wide range of products and quick delivery. LKQ helps customers complete repairs faster, improving productivity. We think the company’s strong distribution network will support its ability to keep order fulfillment rates high in both aftermarket and salvage products.

We saw no major surprises in LKQ's first-quarter earnings, leading us to maintain our $46.50 fair value estimate. Top line was flat in the quarter, as organic revenue growth was offset by the PGW Auto Glass divesture and currency headwinds. On an organic basis, LKQ's North America business showed the strongest gains, increasing 14.4% in the quarter compared with the same period a year earlier. The company was able to raise pricing (more than offsetting cost inflation) and grow volumes in the region. Management highlighted improving supply chains helped drive aftermarket collision parts volumes.

LKQ is the top alternative vehicle-parts provider to repair shops in North America and Europe. We believe the company benefits from scale-driven cost advantages in its business. Customers value LKQ’s consistent parts availability across a wide range of products and quick delivery. LKQ helps customers complete repairs faster, improving productivity. We think the company’s strong distribution network will support its ability to keep order fulfillment rates high in both aftermarket and salvage products.

LKQ is the top alternative vehicle-parts provider to repair shops in North America and Europe. We believe the company benefits from scale-driven cost advantages in its business. Customers value LKQ’s consistent parts availability across a wide range of products and quick delivery. LKQ helps customers complete repairs faster, improving productivity. We think the company’s strong distribution network will support its ability to keep order fulfillment rates high in both aftermarket and salvage products.

LKQ’s 2022 results came in slightly below our expectations, but we still chose to raise our fair value estimate to $46.50 per share from $45.50 previously. The increase is largely attributable to our more optimistic sales forecast starting in 2024. LKQ is a strong vehicle parts company, and we expect multiple secular tailwinds to help grow its revenue base throughout our forecast. In our view, demand for repairs will remain solid in the near term, given the growing and aging number of U.S. vehicles in operation.

LKQ is the top alternative vehicle-parts provider to repair shops in North America and Europe. We believe the company has built scale-driven cost advantages in its business. Customers value LKQ’s consistent parts availability across a wide range of products and quick delivery. LKQ helps customers complete repairs faster, improving productivity. We think the company’s strong distribution network will support its ability to keep order fulfillment rates high in both aftermarket and salvage products.

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.

LKQ reported mixed second-quarter results to close out the first half of 2022. Even so, we raised our fair value estimate to $47 from $46 previously, largely due to our confidence in auto repair demand. While supply headwinds have continued to pressure the auto industry, LKQ has remained rather resilient. The lack of new vehicle builds over the past year has pushed vehicle owners to hang on to their vehicles a lot longer than expected, which in turn has driven greater demand for auto repairs.

LKQ is the top alternative vehicle-parts provider to repair shops in North America and Europe. We believe the company has built scale-driven cost advantages in its business. Customers value LKQ’s consistent parts availability across a wide range of products and quick delivery. LKQ helps customers complete repairs faster, improving productivity. We think the company’s strong distribution network will support its ability to keep order fulfillment rates high in both aftermarket and salvage products.

Narrow-moat-rated LKQ recently held its investor day, where it provided updates on its segment operations and commitment to generate strong free cash flow throughout the cycle. Following the event, our $46 fair value estimate is unchanged, as our long-term thesis remains intact. The demand environment continues to improve as key metrics like vehicle miles traveled and vehicle age have created demand for LKQ’s products. We also believe LKQ’s scale-driven cost advantages over smaller competitors will allow the company to earn strong returns on invested capital through our forecast (approximately 20% on average). In addition, we think management will be able to meet its $1 billion annual free cash flow target, thanks to moves to structurally improve working capital efficiency.

LKQ is the top alternative vehicle-parts provider to repair shops in North America and Europe. We believe the company has built scale-driven cost advantages in its business. Customers value LKQ’s consistent parts availability across a wide range of products and quick delivery. LKQ helps customers complete repairs faster, improving productivity. We think the company’s strong distribution network will support its ability to keep order fulfillment rates high in both aftermarket and salvage products.