LKQ Corporation (LKQ) | Investment Case

1. Company Snapshot

1.a. Company Description

LKQ Corporation distributes replacement parts, components, and systems used in the repair and maintenance of vehicles.It operates through three segments: North America, Europe, and Specialty.The company distributes bumper covers, automotive body panels, and lights, as well as automotive glass products, such as windshields; salvage products, including mechanical and collision parts comprising engines; transmissions; door assemblies; sheet metal products, such as trunk lids, fenders, and hoods; lights and bumper assemblies; scrap metal and other materials to metals recyclers; and brake pads, discs and sensors, clutches, steering and suspension products, filters, and oil and automotive fluids, as well as electrical products, including spark plugs and batteries.

In addition, the company distributes recreational vehicle appliances and air conditioners, towing hitches, truck bed covers, vehicle protection products, cargo management products, wheels, tires, and suspension products.It serves collision and mechanical repair shops, and new and used car dealerships, as well as retail customers.The company operates in the United States, Canada, the United Kingdom, Germany, Belgium, the Netherlands, Luxembourg, Italy, the Czech Republic, Austria, Poland, Slovakia, Taiwan, and other European countries.

LKQ Corporation was incorporated in 1998 and is headquartered in Chicago, Illinois.

Show Full description

1.b. Last Insights on LKQ

LKQ Corporation's recent performance was positively driven by its Q3 earnings beat, with earnings of $0.84 per share exceeding the Zacks Consensus Estimate of $0.74 per share. The company's European and Specialty segments showed strength, exceeding sales and EBITDA estimates. Additionally, LKQ returned $118 million of capital to shareholders through $40 million of share repurchases and $78 million in cash dividends, following the sale of its Self Service segment. This divestiture also led to a raised midpoint and narrowed range for full-year 2025 EPS outlook.

1.c. Company Highlights

Last Price	29.22
Change Percentage	1.21%
Open	28.89
Previous Close	28.87
Market Cap ( Millions)	7480
Volume	929045
Year High	44.82
Year Low	28.42
M A 50	30.2
M A 200	35.68

FCF Yield	9.65%
Dividend Yield	4.11%
ROE	11.04%
Debt / Equity	83.99%
Net Debt / EBIDTA	330.13%
Price To Book	1.15
Price Earnings Ratio	10.78
Price To FCF	10.36
Price To sales	0.54
EV / EBITDA	8.04

2. LKQ Corporation's Q3 2025 Earnings: A Strong Beat on Adjusted EPS

LKQ Corporation reported total revenues of $3.5 billion, a 1.3% increase over the prior year. The company's diluted earnings per share were $0.69, a $0.02 decrease compared to Q3 2024. However, on an adjusted diluted earnings per share basis, LKQ reported $0.84, beating analysts' estimates of $0.74. The company's free cash flow was strong during the quarter at $387 million, bringing the year-to-date free cash flow to $573 million.

Publication Date: Nov -14

                                    📋 Highlights
                                    Segment Sale and Balance Sheet Strength:
                                                Sold Self Service segment for $410M, boosting liquidity and simplifying operations
Lean Cost Savings Progress:
                                                Achieved $35M in global cost savings, on track for $75M annual target
North America Turnaround:
                                                9.4% organic revenue growth (first positive in 14 quarters) despite 30 bps daily revenue decline
Free Cash Flow Generation:
                                                Q3 free cash flow of $387M (YTD $573M), enabling $118M shareholder returns

                                

Segment Performance

In North America, the company posted a 9.4% increase in organic revenue, marking the first positive organic growth in 14 quarters. This turnaround reflects the success of LKQ's targeted initiatives to sharpen focus, improve pricing, and strengthen channel relationships. In Europe, organic revenue declined by 4.7% on a per day basis, reflecting a tough operating environment. However, the European team was still able to deliver double-digit EBITDA margins of 10% in the quarter.

Guidance and Outlook

LKQ updated its guidance for 2025, narrowing its full-year adjusted diluted earnings per share guidance to $3 to $3.15. The company expects reported organic parts and service revenue in the range of negative 200 basis points to negative 300 basis points in Q4 2025. Free cash flow is expected to be in the range of $600 million to $750 million, overcoming a roughly $75 million headwind from the sale of the Self Service segment.

Valuation and Dividend Yield

With a P/E Ratio of 11.56 and an EV/EBITDA of 8.38, LKQ's valuation appears reasonable. The company's Dividend Yield is 3.83%, indicating a relatively attractive income stream for investors. Additionally, the company's Free Cash Flow Yield is 9.0%, suggesting a strong ability to generate cash.

Debt Reduction and Leverage

LKQ finished the quarter at 2.5x levered, but after paying down debt with proceeds from the Self Service sale, the company is more comfortable with its leverage. The company aims to eventually get down to 2x or below, indicating a commitment to deleveraging. With a Net Debt / EBITDA ratio of 3.3, LKQ's debt burden is manageable.

Growth Prospects

Analysts estimate LKQ's revenue growth at 2.2% for the next year. The company's strategic priorities, including simplifying its portfolio and operations, expanding its lean operating model globally, and pursuing a disciplined capital allocation strategy, are expected to drive growth and improve profitability. As Justin Jude mentioned, "We delivered solid Q3 results, beating on adjusted earnings per share, raising the midpoint of our full year guidance, and narrowing the range." This momentum is expected to continue, driven by the company's focus on execution and margin improvement.

3. NewsRoom

LKQ Corporation Initiates Sale Process for Specialty Segment

Dec -04

Source: globenewswire.com

Margins Over Mergers: A New Era For LKQ

Nov -25

Source: seekingalpha.com

Here's Why You Should Retain LKQ Stock in Your Portfolio Now

Nov -20

Source: zacks.com

3 Auto Replacement Parts Stocks to Benefit From Aging Fleet

Nov -19

Source: zacks.com

Exclusive: LKQ taps Bank of America to sell specialty parts business, sources say

Nov -13

Source: reuters.com

4 Ideal November Buys In Barron's 100 Sustainable Dividend Dogs Of 47 'Safer'

Nov -13

Source: seekingalpha.com

Access Investment Dumps $2.8 Million of LKQ (Nasdaq: LKQ) Shares

Nov -07

Source: fool.com

LKQ Corporation (LKQ) Presents at 49th Annual Automotive Symposium Transcript

Nov -04

Source: seekingalpha.com

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (3.79%)

6. Segments

Europe

Expected Growth: 3.5%

Europe's 3.5% growth for LKQ Corporation is driven by increasing demand for aftermarket parts, a growing vehicle parc, and a shift towards more complex repairs. Additionally, LKQ's strategic acquisitions and expansion into new markets have contributed to its growth in the region.

Wholesale - North America

Expected Growth: 4.2%

LKQ Corporation's Wholesale - North America segment growth of 4.2% is driven by increasing demand for recycled and refurbished auto parts, expansion of e-commerce platforms, and strategic acquisitions. Additionally, a growing focus on sustainability and cost savings among insurance companies and collision repair shops is contributing to the segment's growth.

Specialty

Expected Growth: 3.8%

LKQ Corporation's Specialty segment growth of 3.8% is driven by increasing demand for high-margin, niche products, such as collision repair and refinishing materials. Additionally, strategic acquisitions, expansion into new markets, and a strong online presence contribute to the segment's growth. Furthermore, the company's focus on providing a one-stop-shop experience for customers and its ability to capitalize on industry trends, such as the shift towards sustainable repair solutions, also support growth.

Self Service

Expected Growth: 3.2%

LKQ Corporation's Self Service segment growth of 3.2% is driven by increasing demand for recycled auto parts, expansion into new markets, and strategic acquisitions. Additionally, the company's focus on digitalization and e-commerce platforms has improved customer experience, leading to higher sales and market share gains.

7. Detailed Products

Aftermarket Collision Parts

LKQ Corporation offers a wide range of aftermarket collision parts, including bumpers, hoods, fenders, and other body parts, designed to meet or exceed OEM quality standards.

Recycled Parts

LKQ Corporation provides a vast inventory of recycled parts, including engines, transmissions, and other mechanical components, sourced from salvage vehicles.

Remanufactured Components

LKQ Corporation offers remanufactured components, such as engines, transmissions, and fuel injectors, rebuilt to OEM specifications.

Refurbished Wheels

LKQ Corporation provides refurbished wheels, restored to OEM quality and appearance, for a wide range of vehicle makes and models.

Glass and Windshield Repair

LKQ Corporation offers a range of glass and windshield repair services, including windshield replacement, chip repair, and calibration.

Paint and Coatings

LKQ Corporation provides a variety of paint and coatings products, including automotive paints, clear coats, and primers.

8. LKQ Corporation's Porter Forces

Forces Ranking

Threat Of Substitutes

LKQ Corporation faces moderate threat from substitutes, as customers have limited alternatives for replacement parts and accessories. However, the company's strong brand recognition and wide distribution network help mitigate this threat.

Bargaining Power Of Customers

LKQ Corporation's customers have limited bargaining power due to the company's diverse customer base and lack of concentration. Additionally, the company's strong relationships with customers and its ability to offer a wide range of products reduce the bargaining power of customers.

Bargaining Power Of Suppliers

LKQ Corporation's suppliers have moderate bargaining power due to the company's dependence on a few large suppliers. However, the company's strong relationships with suppliers and its ability to negotiate prices help mitigate this threat.

Threat Of New Entrants

The threat of new entrants is low for LKQ Corporation, as the company has a strong brand presence and a large distribution network. Additionally, the company's ability to offer a wide range of products and its strong relationships with suppliers make it difficult for new entrants to compete.

Intensity Of Rivalry

The intensity of rivalry is high in the automotive aftermarket industry, with many competitors vying for market share. However, LKQ Corporation's strong brand recognition, wide distribution network, and ability to offer a wide range of products help the company maintain its competitive position.

9. SWOT Analysis

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

	Value
Debt Weight	47.76%
Debt Cost	5.05%
Equity Weight	52.24%
Equity Cost	10.58%
WACC	7.94%
Leverage	91.42%

11. Quality Control: LKQ Corporation passed 5 out of 9 key points

Strong Liquidity

Low Debt

Strong Interest Coverage

Healthy Cash Flow

Operating Efficiency

Strong Return On Equity

Consistent Revenue Growth

Consistent Operating Cash Flow Growth

Margin Improvement

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

Allison Transmission Holdings

A-Score: 5.6/10

Value: 5.8

Growth: 7.4

Quality: 7.5

Yield: 2.0

Momentum: 3.0

Volatility: 8.0

1-Year Total Return ->

Lear

A-Score: 5.6/10

Value: 7.9

Growth: 5.1

Quality: 4.1

Yield: 5.0

Momentum: 4.0

Volatility: 7.3

1-Year Total Return ->

Dorman Products

A-Score: 5.6/10

Value: 3.7

Growth: 8.0

Quality: 6.5

Yield: 0.0

Momentum: 8.5

Volatility: 6.7

1-Year Total Return ->

LKQ

A-Score: 5.4/10

Value: 7.4

Growth: 5.4

Quality: 4.9

Yield: 6.0

Momentum: 2.0

Volatility: 7.0

1-Year Total Return ->

Gentex

A-Score: 5.4/10

Value: 7.3

Growth: 5.6

Quality: 5.4

Yield: 3.0

Momentum: 4.0

Volatility: 7.3

1-Year Total Return ->

BorgWarner

A-Score: 5.2/10

Value: 5.3

Growth: 3.7

Quality: 4.5

Yield: 2.0

Momentum: 8.0

Volatility: 8.0

1-Year Total Return ->

Peers Metrics

12.e Scoring ^Insights

12.f DCF ^BETA

Parameters

Short Term Growth

-1.59%

Short term Time

10.0

Long-Term Growth

2.00%

WACC

7.94%

LKQ Corporation - US5018892084

1. Company Snapshot

1.a. Company Description

1.b. Last Insights on LKQ

1.c. Company Highlights

Less Volatile

Average Yield

Stable Momentum

Earnings Miss

Revenues Miss

Average Growth

Medium Volatility

Revenues Beats

Weak Momentum

Earnings Beats

Fairly Valued

Higher Yield

2. LKQ Corporation's Q3 2025 Earnings: A Strong Beat on Adjusted EPS

Segment Performance

Guidance and Outlook

Valuation and Dividend Yield

Debt Reduction and Leverage

Growth Prospects

3. NewsRoom

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (3.79%)

6. Segments

Europe

Expected Growth: 3.5%

Wholesale - North America

Expected Growth: 4.2%

Specialty

Expected Growth: 3.8%

Self Service

Expected Growth: 3.2%

7. Detailed Products

Aftermarket Collision Parts

Recycled Parts

Remanufactured Components

Refurbished Wheels

Glass and Windshield Repair

Paint and Coatings

8. LKQ Corporation's Porter Forces

Forces Ranking

Threat Of Substitutes

Bargaining Power Of Customers

Bargaining Power Of Suppliers

Threat Of New Entrants

Intensity Of Rivalry

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

11. Quality Control: LKQ Corporation passed 5 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

29.22$

Current Price

29.22$

Potential

-0.00%

Expected Cash-Flows

12.e Scoring ^Insights

12.f DCF ^BETA