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LKQ Corp (LKQ) Beats on Q3 Earnings, Boosts Buyback Program

Zacks Equity Research

LKQ Corporation LKQ delivered a comprehensive beat in the third quarter of 2019, wherein it surpassed earnings and revenue estimates. The aftermarket auto parts distributor reported adjusted earnings of 61 cents per share, surpassing the Zacks Consensus Estimate of 57 cents. Higher-than-expected revenues from the North American segment led to the outperformance. The bottom line also increased 8.9% year over year.

Third-quarter revenues came in at 3,147 million, outpacing the Zacks Consensus Estimate of $3,119 million. The top line also marginally increased from the year-ago level of $3,122.4 million. The company witnessed 2.3% organic revenue growth in parts and services. Revenue growth from acquisitions was 0.8% year over year.

LKQ Corporation Price, Consensus and EPS Surprise

LKQ Corporation Price, Consensus and EPS Surprise

LKQ Corporation price-consensus-eps-surprise-chart | LKQ Corporation Quote

Segment Highlights

Revenues from the North American unit totaled $1,302 million, up 3.1% year over year. The top line also significantly outpaced the Zacks Consensus Estimate of $1,133 million. EBITDA from the segment came in at $166 million, increasing from the year-ago figure of $154 million and beating the Zacks Consensus Estimate of $165 million.

Revenues from the European segment totaled $1,451.5 million, down 1.3% year over year amid weakening consumer demand and soft economic conditions. However, the figure beat the Zacks Consensus Estimate of $1,448 million. EBITDA from the segment came in at $124.7 million, down 3.5% year over year. Nonetheless, EBITDA from the European unit topped the Zacks Consensus Estimate of $115 million.

Revenues and EBITDA from the Specialty segment came in at $395.3 million and $45.5 million, comparing favorably with the year-ago figures of $390.1 million and $42.9 million, respectively.

Financial Position& Share Buyback

LKQ Corp had cash and cash equivalents of $433.4 million as of Sep 30. Long-term debt amounted to $3,737 million. Its debt-to-capital ratio stands at 43.4%. At the end of third-quarter 2019, the company generated free cash flow of $262.5 million, higher than $136.2 million in the comparable year-ago period. 

During the quarter under review, LKQ Corp repurchased roughly 3.9 million shares for $101 million. Since the initiation of the share repurchase program in October 2018, the company has bought back 13.2 million shares for $352 million. Bringing in pleasant news for investors, LKQ Corp announced plans to boost the share buyback program by an additional $500 million, raising the aggregate authorization to $1 billion.

2019 View Tweaked

For 2019, LKQ Corp forecasts EPS from continuing operations in the band of $1.69-$1.76, down from the previous view of $1.73-$1.81. Organic revenue growth for parts & services is projected within 0.25-1%, down from 0.5-2% expected earlier. Further, adjusted net income is projected to be around $718-$738 million, down from $718-$743 million expected previously. Capex is now projected between $240 million and $260 million versus the previous guided range of $225-$275 million. On a positive note, cash flow from operations is now forecast in the band of $950-$1,000 million, up from the prior view of $800-$875 million.

Zacks Rank & Stocks to Consider

LKQ Corp currently carries a Zacks Rank #4 (Sell).

Some better-ranked stocks in the auto space are Standard Motor Products, Inc. SMP, Tesla TSLA and Polaris Industries Inc. PII, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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