Why Is LKQ (LKQ) Up 5% Since Last Earnings Report?

A month has gone by since the last earnings report for LKQ (LKQ). Shares have added about 5% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is LKQ due for a pullback? 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 Corp. Q1 Earnings & Revenue Surpass Estimates

LKQ reported adjusted earnings of 57 cents per share in first-quarter 2020, surpassing the Zacks Consensus Estimate of 51 cents. The bottom line also increased 1.8% year over year. Higher year-over-year revenues and EBITDA from the North American segment led to this outperformance.

Quarterly revenues came in at 3,000.9 million, topping the Zacks Consensus Estimate of $2,984 million. However, the top line decreased from the year-ago level of $3,100.3 million. Parts and services organic growth also fell 3.5% year over year.

Segment Highlights

Revenues from the North American unit totaled $1,290.2 million, down from $1,302.3 million recorded in the prior-year quarter. EBITDA from the segment came in at $211.4 million, up 19.7% year over year.

Revenues from the European segment totaled $1,363.6 million, down from $1,445.5 million recorded in the prior-year quarter. EBITDA from the segment came in at $78.3 million, down 25.6% year over year.

Revenues and EBITDA from the Specialty segment came in at $348.6 million and $32.2 million, down from the year-ago respective figures of $353.7 million and $37.9 million.

Financial Position

LKQ Corp. had cash and cash equivalents of $332.8 million as of Mar 31, 2020. Long-term debt amounted to $3,672.2 million. At the end of first-quarter 2020, the company generated net cash of $194.5 million from operations, higher than the $177.2 million in the comparable year-ago period. It generated negative free cash flow of $150 million in the quarter compared with the year-earlier figure of $124.2 million.

During first-quarter 2020, LKQ Corp. bought back 3.3 million shares of common stock for a total consideration of $88 million. However, amid coronavirus-led uncertainty and financial crisis, the company has suspended share buybacks as well as withdrawn its view for 2020.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates. The consensus estimate has shifted -63.21% due to these changes.

VGM Scores

At this time, LKQ has a nice Growth Score of B, though it is lagging a bit on the Momentum Score front with a C. However, the stock was allocated a grade of A on the value side, putting it in the top 20% 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

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise LKQ has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.

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