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Chicago, Illinois-based LKQ Corporation (LKQ) distributes replacement parts, components, and systems used in the repair and maintenance of vehicles and specialty vehicle aftermarket products and accessories. Valued at $9.9 billion by market cap, the company provides alternative collision replacement parts, recycled engines, transmissions, replacement systems, components, and parts for the repair of automobiles and light, medium, and heavy-duty trucks.
Shares of this leading distributor of automotive replacement parts have significantly underperformed the broader market over the past year. LKQ has declined 17.4% over this time frame, while the broader S&P 500 Index ($SPX) has rallied nearly 31.1%. In 2024, LKQ stock is down 21.3%, compared to the SPX’s 24.1% rise on a YTD basis.
Narrowing the focus, LKQ’s underperformance is apparent compared to the Consumer Discretionary Select Sector SPDR Fund (XLY). The exchange-traded fund has gained about 29% over the past year. Moreover, the ETF’s 20.6% gains on a YTD basis outshine the stock’s losses over the same time frame.
On Oct. 24, LKQ shares closed down marginally after reporting its Q3 results. Its adjusted EPS of $0.88 surpassed Wall Street expectations of $0.87. The company’s revenue was $3.58 billion, falling short of Wall Street forecasts of $3.63 billion. LKQ expects adjusted EPS to be between $3.38 and $3.52.
For the current fiscal year, ending in December, analysts expect LKQ’s EPS to decline 10.4% to $3.43 on a diluted basis. The company’s earnings surprise history is mixed. It beat the consensus estimate in two of the last four quarters while missing the forecast on two other occasions.
Among the eight analysts covering LKQ stock, the consensus is a “Strong Buy.” That’s based on six “Strong Buy” ratings, one “Moderate Buy,” and one “Hold.”
The configuration is consistent over the past three months.
On Oct. 30, Robert W. Baird analyst Craig Kennison maintained a “Buy” rating on LKQ with a price target of $48, implying a potential upside of 27.7% from current levels.
The mean price target of $53.43 represents a 42.1% premium to LKQ’s current price levels. The Street-high price target of $60 suggests an ambitious upside potential of 59.6%.
