Why Is LKQ Down 5.3% Since Its Last Earnings Report?
It has been about a month since the last earnings report for LKQ Corporation LKQ. Shares have lost about 5.3% in that time frame.
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 drivers.
LKQ Earnings Lag, Revenues Top Estimates in Q4
LKQ Corporation’s fourth-quarter 2017 adjusted earnings from continuing operations came in at 41 cents per share, missing the Zacks Consensus Estimate of 42 cents. However, the bottom line improved from the prior-year quarter figure of 35 cents.
Adjusted net income from continuing operations was $126 million in comparison to $108 million in the prior-year quarter.
In the fourth quarter, total revenue rose 14.9% to $2.42 billion from $2.15 billion a year ago and also outpaced Zacks Consensus Estimate of $2.37 billion. The company witnessed a 4.8% organic revenue growth in parts and services, out of which its North American segment contributed 5%.
Full-Year 2017 Results
LKQ Corp reported adjusted earnings from continuing operations to be around $1.88 per share in 2017, up from $1.69 earned in 2016. The Zacks Consensus Estimate for earnings was $1.89 per share.
In 2017, revenues increased to $9.74 billion from $8.58 billion in 2016. The figure also surpassed Zacks Consensus Estimate of $9.67 billion.
Business Developments
In fourth-quarter 2017, LKQ Corp completed the buyout of Warn Industries. Additionally, it acquired four businesses including automotive glass distributor of Kansas, automotive glass distributor in New Jersey, aftermarket parts distributor of Bosnia and Herzegovina and aftermarket parts distributor in the Netherlands.
Also, during the quarter, European operations of LKQ Corp opened six and nine new branches in Western Europe and Eastern Europe, respectively.
Financial Position
LKQ Corp had cash and cash equivalents of $280 million as of Dec 31, 2017, compared with $227.4 million as of Dec 31, 2016.
At the end of 2017, LKQ Corp had net cash provided by operating activities of around $518.9 million compared with $635 million in the prior year.
2018 Outlook
For 2018, LKQ Corp expects organic revenue growth for parts & services in the range of 4-6% in comparison to 4.1% recorded in 2017.
Further, adjusted net income from continuing operations is expected to be within the range of $720-$750 million, whereas adjusted earnings from continuing operations in 2018 are expected to be in the band of $2.3-$2.4 per share.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates. There have been six revisions higher for the current quarter compared to one lower.
LKQ Corporation Price and Consensus
LKQ Corporation Price and Consensus | LKQ Corporation Quote
VGM Scores
At this time, LKQ has a subpar Growth Score of D. Its momentum is doing a lot better with an A. The stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Our style scores indicate that the stock is more suitable for momentum investors than value investors.
Outlook
Estimates have been broadly trending upward for the stock and the magnitude of these revisions looks promising. It comes with little surprise LKQ has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.
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