Why Is LKQ Down 1.2% Since Its Last Earnings Report?

It has been about a month since the last earnings report for LKQ Corporation (NASDAQ:LKQ) . Shares have lost about 1.2% in that time frame.

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 catalysts.

LKQ Posts Lower-Than-Expected Earnings in Q1, Revenues Beat

LKQ Corporation’s first-quarter 2018 adjusted earnings from continuing operations came in at 55 cents per share, missing the Zacks Consensus Estimate of 59 cents. However, the bottom line improved from the prior-year quarter figure of 49 cents.

Adjusted net income from continuing operations was $170 million in comparison to $153 million in the prior-year quarter.

In the reported quarter, total revenues rose 16.1% to $2.72 billion from $2.34 billion a year ago and also outpaced Zacks Consensus Estimate of $2.6 billion. The company witnessed 3.7% organic revenue growth in parts and services, out of which its North American segment contributed 6.5%.

Business Developments

In the first quarter of 2018, LKQ Corp priced an offering of €1.0 billion in aggregate principal amount of senior notes. The offering consisted of €750 million 3.625% senior notes due 2026 (the “2026 notes”) and €250 million 4.125% senior notes due 2028 (the “2028 notes” and, together with the 2026 notes, the “notes”).

Also, during the quarter, European operations of LKQ Corp opened one and four new branches in Western Europe and Eastern Europe, respectively.

Financial Position

LKQ Corp had cash and cash equivalents of $245.7 million as of Mar 31, 2018, compared with $264.6 million as of Mar 31, 2017.

For the first quarter of 2018, LKQ Corp had net cash provided by operating activities of around $145 million.

2018 Outlook

For 2018, LKQ Corp expects organic revenue growth for parts & services in the range of 4-5.5%, in comparison to the prior guidance of 4-6%.

Further, adjusted net income from continuing operations is expected in the range of $685-$715 million down from the earlier guidance of $720-$750 million. Adjusted earnings per share from continuing operations in 2018 is expected to be in the band of $2.2 to $2.3 declining from the prior guidance of $2.3-$2.4.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates. There have been nine revisions lower for the current quarter. In the past month, the consensus estimate has shifted downward by 10.3% due to these changes.

LKQ Corporation Price and Consensus

LKQ Corporation Price and Consensus | LKQ Corporation Quote

VGM Scores

At this time, LKQ has a nice Growth Score of B, however its Momentum is doing a bit better with an A. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Based on our scores, the stock is more suitable for momentum investors than those looking for value and growth.

Outlook

Estimates have been broadly trending downward for the stock and the magnitude of these revisions indicates a downward shift. It's no surprise LKQ has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.