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LKQ Corp Aided by New Branch Openings, Margin Woes Remain

Zacks Equity Research
Updated

On Dec 28, we issued an updated research report on LKQ Corporation LKQ.

The company is focused on expansion through acquisitions. In third-quarter 2017, LKQ Corp. acquired 11 companies. Also, the company is focused on expanding operations in Europe. In order to do so, the company has been opening new Euro Car Parts (ECP) branches for counter sales and distribution centers in the continent, which in turn is giving a boost to its sales growth.  Also, during third-quarter 2017, its subsidiary Rhiang opened four new branches and acquired another 49 in Europe.

For 2017, the company anticipates adjusted EPS from continuing operations to be in the range of $1.86-$1.92 per share, up from the prior expectation of $1.84-$1.92. For 2017, LKQ Corp. expects organic revenue growth for parts & services to be in the range of 4-5.25% compared with the previous guidance of 4-4.5%.

LKQ Corp. has a long-term growth rate of 16%. The company has outperformed the industry it belongs to in the last three months. The company’s shares have gained 15.2% compared with the industry’s loss of 3.2%.



However, fluctuating prices of fuel, scrap metal and other commodities besides frequent acquisitions might lead to rising costs for LKQ Corp., thereby hampering its financials. Gross margins are under pressure due to its recent acquisitions.

LKQ Corp. currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.

A few better-ranked automobile stocks in the same space are Allison Transmission Holdings, Inc. ALSN, American Axle & Manufacturing Holdings, Inc. AXL and Oshkosh Corporation OSK, each sporting a Zacks Rank #1.

Allison Transmission has a long-term growth rate of 10%. The company’s shares have gained 29.3% year to date.

American Axle & Manufacturing has a long-term growth rate of 8.1%. The company’s shares have gained 14.7% over the past six months.

Oshkosh Corporation has a long-term growth rate of 16.5%. Its shares have rallied 40.8 % on a year-to-date basis.

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