LKQ (LKQ) Down 10.5% Since Last Earnings Report: Can It Rebound?

It has been about a month since the last earnings report for LKQ (LKQ). Shares have lost about 10.5% 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 drivers.

LKQ CorpQ1 Earnings Drive Past Estimates, Revenues Miss Mark

LKQ Corp first-quarter 2019 adjusted earnings were 56 cents per share, which rose 2% from 55 cents recorded in the prior-year quarter. Further, the figure surpassed the Zacks Consensus Estimate of 55 cents. Improvement in North America gross margin along with pricing initiatives to offset inflationary pressures aided year-over-year earnings growth.

Adjusted net income was $176 million, marking 4% rise from $170 million recorded in the same period of 2018.

In the first quarter, revenues rose 14% to $3.1 billion from $2.7 billion a year ago. However, the figure narrowly missed the Zacks Consensus Estimate of $3.17 billion. The company witnessed 0.1% organic revenue growth in parts and services while revenue growth from acquisition was 18.3%.

Financial Position

LKQ Corp had cash and cash equivalents of $316 million as of Mar 31, 2019, compared with $332 million as of Dec 31, 2018.

At the end of first-quarter 2019, the company had net cash provided by operating activities of $177 million compared with $145 million as of Dec 31, 2018. Free cash flow improved 50% year over year to $124 million.

2019 Outlook

For 2019, LKQ Corp lowered the projection for earnings per share to $1.87-$2.00 compared with previously mentioned $2.05-$2.17. However, organic revenue growth projection for parts & services remained unchanged at 2-4%. Further, adjusted net income was unaltered at $732-$771 million.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates.

VGM Scores

At this time, LKQ has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with an F. 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 B. 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 this revision indicates a downward shift. Notably, 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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