Report
Valens Research

LKQ - Embedded Expectations Analysis - 2018 08 29

LKQ Corporation (LKQ:USA) currently trades near historical averages relative to UAFRS-based (Uniform) Earnings, with an 18.7x Uniform P/E. At these levels, the market has bearish expectations for the firm, and management has concerns about their ability to maintain strong margins and limit operational costs

Specifically, management may be concerned about their ability to maintain strong revenue growth in their total parts and services business in North America, and to achieve their increased EPS guidance. Moreover, they may be concerned about the financial impacts of their recent STAHLGRUBER acquisition, particularly with regards to the increased interest expense from the financing for the acquisition. Furthermore, they may be concerned that the recent increases in effective tax rates and employee benefit costs, as well as decreases in North American EBITDA, will continue. Finally, they may be concerned about their ability to maintain margin expansion, particularly in their Specialty business and in their European segments, specifically the Sator business in the Benelux region
Underlying
LKQ Corporation

LKQ is a holding company. Through its subsidiaries, the company provides alternative vehicle collision replacement products and alternative vehicle mechanical replacement products. The company is also a provider of alternative vehicle replacement and maintenance products in the United Kingdom, Germany, the Benelux region (Belgium, Netherlands, and Luxembourg), Italy, Czech Republic, Poland, Slovakia, Austria, and other European countries. In addition to its wholesale operations, the company operates self service retail facilities across the United States that sell recycled automotive products from end-of-life-vehicles. The company is also a distributor of specialty vehicle aftermarket equipment and accessories.

Provider
Valens Research
Valens Research

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