LKQ's Q2 Earnings Beat, Sales Fall Short of Expectations
LKQ Corporation LKQ reported adjusted earnings of $1.09 per share for second-quarter 2022, surpassing the Zacks Consensus Estimate of $1.02, thanks to higher-than-expected revenues from the Wholesale North American segment. The bottom line, however, declined 3.5% year over year. This aftermarket auto parts distributor registered quarterly revenues of $3,341 million, missing the Zacks Consensus Estimate of $3,389 million. In addition, the top line tailed off 2.1% from the year-ago level. The parts and services organic revenues also increased 3.8% year over year.
LKQ Corporation Price, Consensus and EPS Surprise
LKQ Corporation price-consensus-eps-surprise-chart | LKQ Corporation Quote
Segment Highlights
In the reported quarter, revenues from the Wholesale North American segment totaled $1,144 million, increasing around 2.2% from $1,119 million reported in the prior-year period and topping the consensus mark of $974 million. The segment’s EBITDA came in at $214 million, down from $219 million in the second quarter of 2021.
Revenues from the European segment were $1,477 million, down 6.3% from $1,577 million in the year-earlier quarter and marginally falling short of the consensus mark of $1,478 million. The segment’s EBITDA came in at $160 million, contracting from $168 million in the year-ago period.
Revenues from the Specialty segment came in at $513 million, down 3.5% year over year and missing the consensus mark of $537 million. The segment EBITDA was $69 million, 16% lower than the year-ago figure.
Revenues from the Self Service segment totaled $208 million, inching down from $209 million in the year-earlier quarter. The segment’s EBITDA was $32 million, shrinking 43%.
Financial Position & Dividend
LKQ had cash and cash equivalents of $265 million on Jun 30, 2022, down from $274 million recorded as of Dec 31, 2021. The long-term debt (excluding the current portion) amounted to $2,313 million as of Jun 30, 2022, down from $2,777 million recorded on Dec 31, 2021. As of Jun 30, 2022, LKQ’s balance sheet reflected net debt of $2.1 billion.
During the quarter, cash flow provided by operating activities totaled $328 million. Capital expenditure was $40 million, with the company recording a positive free cash flow of $288 million.
During the reported quarter, the company repurchased 8.1 million shares worth $404 million. Between the period of initiating the stock buyback program in late October 2018 and Jun 30, 2022, it repurchased around 45 million shares for a total of $1.9 billion. In May, the company boosted its buyback authorization to $2.5 billion.
On Jul 26, 2022, LKQ declared a quarterly cash dividend of 25 cents per share of common stock, to be paid out to stockholders of record at the close of business on Aug 11.
2022 Guidance
For 2022, the company tightened its projection for adjusted EPS to $3.85-$4.05 from the earlier $3.80-$4.10 per share. The company’s estimate of free cash flow remains the same, at a minimum of $1 billion and an operating cash flow of $1.3 billion. Its forecast of organic revenue growth for parts and services also remains unchanged in the range of 4.5%-6.5%
Zacks Rank & Key Picks
LKQ currently carries a Zacks Rank #3 (Hold). A few better-ranked players in the auto space include Garrett Motion GTX and Commercial Vehicle Group CVGI. Both these stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Switzerland-based Garrett designs, manufactures, and sells turbocharger and electric-boosting technologies. The Zacks Consensus Estimate for GTX’s 2022 earnings and sales implies year-over-year growth of 6.7% and 1.8%, respectively. The consensus mark for 2022 earnings has been revised upward by 5 cents in the past 60 days. Over the trailing four quarters, Garrett surpassed earnings estimates twice for as many misses, the average being 75.4%.
Ohio-based Commercial Vehicle Group supplies interior systems, vision safety solutions and other cab-related products for the global commercial vehicle market, including the heavy-duty (Class 8) truck market, the construction market and other specialized transportation markets. The Zacks Consensus Estimate for CVGI’s 2022 earnings and sales implies year-over-year growth of 6.2% and 2.6%, respectively. The consensus mark for 2022 earnings has been revised upward by 10 cents in the past 30 days.
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