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A week ago, LKQ Corporation (NASDAQ:LKQ) came out with a strong set of third-quarter numbers that could potentially lead to a re-rate of the stock. It was overall a positive result, with revenues beating expectations by 3.3% to hit US$3.0b. LKQ also reported a statutory profit of US$0.64, which was an impressive 40% above what the analysts had forecast. This is an important time for investors, as they can track a company's performance in its report, look at what experts are forecasting for next year, and see if there has been any change to expectations for the business. So we collected the latest post-earnings statutory consensus estimates to see what could be in store for next year.
Taking into account the latest results, the current consensus from LKQ's ten analysts is for revenues of US$12.2b in 2021, which would reflect a satisfactory 4.6% increase on its sales over the past 12 months. Per-share earnings are expected to shoot up 29% to US$2.53. Before this earnings report, the analysts had been forecasting revenues of US$12.2b and earnings per share (EPS) of US$2.38 in 2021. The analysts seems to have become more bullish on the business, judging by their new earnings per share estimates.
There's been no major changes to the consensus price target of US$41.56, suggesting that the improved earnings per share outlook is not enough to have a long-term positive impact on the stock's valuation. That's not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. There are some variant perceptions on LKQ, with the most bullish analyst valuing it at US$54.00 and the most bearish at US$37.00 per share. Analysts definitely have varying views on the business, but the spread of estimates is not wide enough in our view to suggest that extreme outcomes could await LKQ shareholders.
These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the LKQ's past performance and to peers in the same industry. We would highlight that LKQ's revenue growth is expected to slow, with forecast 4.6% increase next year well below the historical 12%p.a. growth over the last five years. Compare this to the 40 other companies in this industry with analyst coverage, which are forecast to grow their revenue at 5.1% per year. So it's pretty clear that, while LKQ's revenue growth is expected to slow, it's expected to grow roughly in line with the industry.
The Bottom Line
The most important thing here is that the analysts upgraded their earnings per share estimates, suggesting that there has been a clear increase in optimism towards LKQ following these results. They also reconfirmed their revenue estimates, with the company predicted to grow at about the same rate as the wider industry. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.
Keeping that in mind, we still think that the longer term trajectory of the business is much more important for investors to consider. We have estimates - from multiple LKQ analysts - going out to 2024, and you can see them free on our platform here.
However, before you get too enthused, we've discovered 1 warning sign for LKQ that you should be aware of.
This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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