LKQ (LKQ) Down 7.7% Since Last Earnings Report: Can It Recover?

A month has passed since the last LKQ (LKQ) results report. Shares have lost about 7.7% in that time, underperforming the S&P 500.

Will the recent negative trend continue leading up to the next earnings release, or is LKQ due for a breakout? Before we dive into how investors and analysts have reacted as of late, let’s take a quick look at the most recent earnings report in order to better understand the important catalysts.

LKQ beats second-quarter earnings estimates, lowers forecast

LKQ Corp’s second-quarter 2019 adjusted earnings were 65 cents per share, up 7% from the 61 cents reported in the prior-year quarter. Moreover, the figure surpassed the Zacks Consensus Estimate of 64 cents.

Adjusted net income was $204 million, an increase of 6.3% compared to $192 million reported in the same period in 2018.

In the second quarter, revenue rose 7% to $3.25 billion from $3.03 billion a year ago. However, this number missed the Zacks Consensus Estimate of $3.30 billion. The company reported organic parts and services revenue growth of 2.1%, while revenue from acquisitions was 12.6%.

Financial position

As of June 30, 2019, LKQ had cash and cash equivalents of $376 million compared to $331.8 million as of December 31, 2018.

At the end of the second quarter of 2019, the company had net cash from operating activities of $461.2 million compared to $183.5 million at June 30, 2018. Free cash flow improved significantly year-over-year, reaching $537 million USD.

Share repurchase

During the quarter, LKQ repurchased approximately 4.4 million shares for $120 million. Since the start of share buybacks in October 2018, the company has repurchased 9.3 million shares for $251 million.

Outlook for 2019

For 2019, LKQ lowered its earnings per share forecast to $1.73-$1.81 from the previously mentioned $1.87-$2.00. Organic revenue growth for the Parts and Services segment is forecast to be 0.5% to 2%, up from the previously reported 2% to 4%. Additionally, adjusted net income is forecast to be approximately $718 million to $743 million, up from the previously reported $732 million to $771 million.

How have estimates changed since then?

Overview of estimates has been on a downward path over the past two months. Due to these changes, the consensus estimate moved -5.99%.

VGM results

At this point, LKQ has a great Growth Score of A, although it lags well behind its Momentum Score of D. However, the stock is rated a B on the value side, ranking in the top 40% for this investment strategy.

Overall, the company’s Total VGM Score is A. If you’re not focused on one strategy, this score should interest you.

Perspectives

LKQ carries a Zacks Rank #3 (Hold). We expect a linear rate of return on the stock over the next few months.

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