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

Zacks Equity Research

A month has gone by since the last earnings report for LKQ (LKQ). Shares have lost about 7.7% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its 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 get a better handle on the important catalysts.

LKQ Surpasses Earnings Estimates in Q2, Lowers Guidance

LKQ Corp second-quarter 2019 adjusted earnings were 65 cents per share, which rose 7% from 61 cents recorded in the prior-year quarter. Further, the figure surpassed the Zacks Consensus Estimate of 64 cents.

Adjusted net income was $204 million, marking 6.3% rise from $192 million recorded in the same period of 2018.

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

Financial Position

LKQ had cash and cash equivalents of $376 million as of Jun 30, 2019, compared with $331.8 million as of Dec 31, 2018.

At the end of second-quarter 2019, the company had net cash provided by operating activities of $461.2 million compared with $183.5 million as of Jun 30, 2018. Free cash flow improved significantly year over year to $537 million.

Share Buyback

During the quarter under review, LKQ repurchased roughly 4.4 million shares for $120 million. Since the initiation of share repurchase in October 2018, the company has bought back 9.3 million shares for $251 million.

2019 Outlook

For 2019, LKQ lowered the earnings per share projection to $1.73-$1.81 from the previously mentioned $1.87-$2.00. Organic revenue growth for parts & services is projected to be 0.5-2%, down from 2-4% stated earlier. Further, adjusted net income is projected to be around $718-$743 million, down from $732-$771 million mentioned previously.

How Have Estimates Been Moving Since Then?

Estimates review followed a downward path over the past two months. The consensus estimate has shifted -5.99% due to these changes.

VGM Scores

At this time, LKQ has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with a D. However, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

LKQ has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.



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