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LKQ Corp. (LKQ) to Post Q1 Earnings: What's in the Offing?

Zacks Equity Research
·4 min read

LKQ Corporation LKQ is slated to release first-quarter 2020 results on Apr 30, before the opening bell. The Zacks Consensus Estimate for the quarter’s earnings is pegged at 50 cents per share on revenues of $3 billion.

The aftermarket auto parts distributor delivered better-than-expected results in the last reported quarter on higher-than-anticipated profits from the North American segment. LKQ beat estimates in each of the trailing four quarters, the average positive surprise being 3.56%. This is depicted in the graph below:

LKQ Corporation Price and Consensus

LKQ Corporation Price and Consensus
LKQ Corporation Price and Consensus

LKQ Corporation price-consensus-chart | LKQ Corporation Quote

Which Way are the Estimates Headed?

Hit by the coronavirus crisis, the Zacks Consensus Estimate for LKQ’s first-quarter earnings per share has been revised downward by two cents to 50 cents in the past seven days. The figure also indicates a year-over-year decline of 10.71%. The Zacks Consensus Estimate for revenues suggests a year-over-year decrease of 3.34%.

Factors Setting the Tone

LKQ is expected to have faced a decline in sales volumes amid industry headwinds. Heightening coronavirus fears, especially in March, are likely to have thwarted vehicle demand, in turn dampening demand for replacement parts, components, and systems that are required to repair and maintain vehicles. The coronavirus crisis is expected to have hurt LKQ’s sales due to factory closures and production shutdowns in United States, Europe and Canada.

Moreover, a challenging macroeconomic environment in Europe is likely to have negatively impacted its overall consumer demand in the U.K. With Europe being a major market for LKQ, lower vehicle sales amid a weakening consumer demand and soft economic conditions are expected to have hurt the firm’s top line. Further, LKQ’s elevated SG&A costs, and rising restructuring and acquisition-related expenses are expected to have clipped margins in the March-end quarter.

What the Zacks Model Says

Our proven model does not conclusively predict an earnings beat for LKQ this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. However, that is not the case here as elaborated below. You can see the complete list of today’s Zacks #1 Rank stocks here.

Earnings ESP: LKQ has an Earnings ESP of -5.76%. This is because the Most Accurate Estimate of 47 cents per share comes in three cents lower than the Zacks Consensus Estimate. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: LKQ carries a Zacks Rank of 4 (Sell) currently.

Stocks to Consider

Here are a few stocks worth considering, as these have the right combination of elements to come up with an earnings beat this time around:

Anthem, Inc. ANTM has an Earnings ESP of +0.05% and carries a Zacks Rank #3 currently. The company is slated to release first-quarter 2020 earnings on Apr 29.

The Allstate Corporation ALL is set to report quarterly numbers on May 6. The company has an Earnings ESP of +2.18% and holds a Zacks Rank of 2, at present.

Cigna Corporation CI is scheduled to release earnings figures on Apr 30. The stock has an Earnings ESP of +0.02% and currently carries a Zacks Rank #3.

Zacks Top 10 Stocks for 2020

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The Allstate Corporation (ALL) : Free Stock Analysis Report
 
Cigna Corporation (CI) : Free Stock Analysis Report
 
Anthem, Inc. (ANTM) : Free Stock Analysis Report
 
LKQ Corporation (LKQ) : Free Stock Analysis Report
 
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Zacks Investment Research