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LKQ Posts EBITDA Margin Expansion Despite 7% Decline in 2020 Revenue; Shares Fairly Valued

Analyst Note

| Brian Bernard, CFA, CPA |

Narrow-moat LKQ performed about in line with our expectations for fourth-quarter and fiscal-year 2020. Compared with the prior-year period, revenue declined 2% during the fourth quarter and 7% for the full year. The full-year revenue decline was mostly due to a 19% drop in second-quarter revenue stemming from COVID-19 shutdowns. LKQ rebounded quickly in the second half of 2020 but continues to face headwinds in North America and Europe. We are optimistic about growth opportunities moving forward, as vaccine distributions commence in these geographies, and we therefore forecast 2021 revenue growth of 8% and 7% in North America and Europe, respectively. We forecast midcycle revenue growth of 3.5% for both segments.

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Company Profile

Business Description

LKQ is a leading global distributor of non-OEM automotive parts. Initially formed in 1998 as a consolidator of auto salvage operations in the United States, it has since greatly expanded its scope to include distribution of new mechanical and collision parts, specialty auto equipment, and remanufactured and recycled parts in both Europe and North America. It still maintains its auto salvage business and owns over 75 LKQ pick- your-part junkyards. Separate from the self-service business, LKQ purchases over 300,000 salvage automobiles annually that are used to extract parts for resale. Globally, LKQ maintains approximately 1,700 facilities.

500 West Madison Street, Suite 2800
Chicago, IL, 60661
T +1 312 621-1950
Sector Consumer Cyclical
Industry Auto Parts
Most Recent Earnings Dec 31, 2020
Fiscal Year End Dec 31, 2021
Stock Type Cyclical
Employees 44,000