Download PDF

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 faces challenges, including negative organic growth, pressure on margins, and a weak European market. The company's Q4 earnings miss and revenue decline year-over-year have raised concerns. A potential sale of its Specialty segment could provide a valuation floor and improved sentiment. Kettle Hill's sale of 777,000 shares worth $23.4 million may have added to downward pressure. Zacks has rated LKQ as a Strong Sell, citing multiple headwinds. Management's strategic review and cost-cutting initiatives aim to enhance shareholder value.

1.c. Company Highlights

2. LKQ Corporation's Mixed 2025 Results: A Closer Look

LKQ Corporation reported revenues of $3.3 billion for the fourth quarter, a 2.7% year-over-year increase, with diluted EPS of $0.29 and adjusted diluted EPS of $0.59. The actual EPS of $0.59 fell short of estimates of $0.65. The company's free cash flow was $274 million in the quarter, with full-year free cash flow reaching $847 million. For 2026, LKQ expects organic parts and services revenue growth between negative 0.5% and positive 1.5%, with adjusted diluted EPS in the range of $2.90 to $3.20.

Publication Date: Feb -22

📋 Highlights
  • Free Cash Flow Strength:: LKQ generated $825 million in free cash flow in 2025, with $274 million in the fourth quarter alone.
  • Specialty Segment Growth:: The Specialty segment achieved 7.8% organic revenue growth, despite plans to explore its potential sale.
  • European Challenges:: Organic revenue in Europe declined 5.2%, but the company aims for 200 bps of margin expansion through cost-cutting and private label adoption.
  • 2026 Financial Guidance:: Adjusted diluted EPS is projected between $2.90–$3.20, with free cash flow expected to range from $700 million to $850 million.
  • Restructuring Impact:: A $60–70 million restructuring cost is anticipated, yielding over $50 million in annualized savings and EBITDA margin recovery to double digits by 2026.

Segment Performance

In North America, LKQ's organic revenue decreased 1% in the fourth quarter, despite gaining market share and maintaining pricing discipline. The Specialty segment delivered 7.8% organic revenue growth, and the company is exploring the potential sale of this segment. In Europe, the company implemented a more aggressive pricing strategy and focused on private label growth, delisting 71,000 SKUs.

Operational Highlights

Justin Jude noted positive early signs of improving market conditions in North America, including lower insurance premiums and rising used car prices. The company is driving private label adoption, which should allow it to raise prices and improve margins. LKQ is also seeing growth in EVs, with opportunities to capitalize on salvage and recycling. As Justin Jude stated, "We're seeing share gains with MSOs, with volumes up in the teens, outperforming their overall growth."

Valuation and Outlook

With a P/E Ratio of 14.17 and an EV/EBITDA of 8.92, the market appears to have priced in a moderate growth outlook for LKQ. The company's Free Cash Flow Yield of 9.7% is attractive, indicating a strong ability to generate cash. For 2026, analysts estimate revenue growth at 2.2%, which is within the company's guidance range. LKQ's efforts to drive private label adoption, cut costs, and improve margins should help it navigate the challenging market conditions.

Challenges Ahead

In Europe, the market continues to deteriorate, with consumer spending down and competitive pressure increasing. LKQ is working to integrate and cut costs, with a goal of achieving 200 basis points of margin expansion. The company's resilience and anticipated market recovery in the latter half of 2026 should yield positive results.

3. NewsRoom

Card image cap

Automotive Parts Stock Down 31% Draws $16 Million Bet as Earnings Fall 50% Year Over Year

Mar -20

Source: fool.com

Card image cap

Small Cap Value ETFs: IWN Boasts Greater Small Cap Exposure But SLYV Has a Higher Yield

Mar -16

Source:

Card image cap

Kettle Hill Dumps 777,000 LKQ Shares Worth $23.4 Million

Mar -06

Source: fool.com

Card image cap

LKQ Corp.: More Things To Be Fixed Before This Can Be A Buy

Mar -05

Source: seekingalpha.com

Card image cap

New Strong Sell Stocks for February 26th

Feb -26

Source: zacks.com

Card image cap

Bernard Horn's Strategic Moves: Exiting The Carlyle Group Inc with a -1.68% Impact

Feb -23

Source: gurufocus.com

Card image cap

LKQ Q4 Earnings Miss Expectations, Revenues Decline Y/Y

Feb -20

Source: zacks.com

Card image cap

What's Going On With LKQ Corporation Stock Today?

Feb -19

Source: benzinga.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

Strength

Weaknesses

Opportunities

Threats

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

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

Stock-Card
Lear

A-Score: 6.0/10

Value: 7.7

Growth: 4.9

Quality: 4.2

Yield: 5.0

Momentum: 7.0

Volatility: 7.3

1-Year Total Return ->

View Full Report
Stock-Card
LKQ

A-Score: 5.5/10

Value: 7.7

Growth: 5.4

Quality: 4.9

Yield: 6.0

Momentum: 2.5

Volatility: 6.7

1-Year Total Return ->

View Full Report
Stock-Card
Allison Transmission Holdings

A-Score: 5.3/10

Value: 5.4

Growth: 7.4

Quality: 7.4

Yield: 2.0

Momentum: 2.0

Volatility: 7.7

1-Year Total Return ->

View Full Report
Stock-Card
BorgWarner

A-Score: 5.3/10

Value: 5.7

Growth: 3.7

Quality: 4.2

Yield: 2.0

Momentum: 8.5

Volatility: 7.7

1-Year Total Return ->

View Full Report
Stock-Card
Gentex

A-Score: 5.2/10

Value: 6.0

Growth: 5.6

Quality: 7.4

Yield: 3.0

Momentum: 2.0

Volatility: 7.3

1-Year Total Return ->

View Full Report
Stock-Card
Dorman Products

A-Score: 5.1/10

Value: 4.5

Growth: 8.0

Quality: 6.5

Yield: 0.0

Momentum: 5.0

Volatility: 6.7

1-Year Total Return ->

View Full Report

Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

29.37$

Current Price

29.37$

Potential

-0.00%

Expected Cash-Flows