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LKQ Corporation (LKQ), headquartered in Chicago, Illinois, is a global distributor of replacement parts, components, and systems for vehicle repair and maintenance, along with aftermarket products and accessories for specialty vehicles. With a market cap of $9.5 billion, 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.
Companies worth $2 billion or more are generally described as “mid-cap stocks,” and LKQ definitely fits that description, with its market cap exceeding this threshold, reflecting its substantial size, influence, and dominance in the auto parts industry. LKQ's focus on sustainability, through recycling and remanufacturing, leverages its solid footprint with 1,700 facilities worldwide and economies of scale to serve a large customer base. It benefits from a solid brand reputation, a robust supply chain, and a customer-focused approach, serving repair shops, dealerships, and individual consumers with quality and reliability, solidifying its position as a dominant player in the industry.
Despite its notable strength, LKQ slipped 31.1% from its 52-week high of $53.68, achieved on Mar. 28. Over the past three months, LKQ stock fell 7.7% underperforming the Consumer Discretionary Select Sector SPDR Fund’s (XLY) 16.5% gains during the same time frame.
In the longer term, shares of LKQ fell 11.1% over the past six months and dipped 22.8% over the past 52 weeks, underperforming XLY’s six-month gains of 27.4% and 29.6% returns over the last year.
To confirm the bearish trend, LKQ is trading below its 50-day and 200-day moving averages since early April, experiencing some fluctuations.
LKQ’s underperformance can be attributed to the weakening demand for vehicle parts, driven by a decline in repairable claims. Soaring insurance premiums and escalating repair costs are prompting consumers to forgo repairing their vehicles, negatively impacting LKQ's business.
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 full-year adjusted EPS to be between $3.38 and $3.52.
LKQ’s rival, Genuine Parts Company (GPC) shares lagged behind the stock, declining 15.6% over the past six months. However, it has taken the lead over the LKQ, declining 15.9% over the past 52 weeks.
Wall Street analysts are bullish on LKQ’s prospects. The stock has a consensus “Strong Buy” rating from the eight analysts covering it, and the mean price target of $53.43 suggests a potential upside of 44.4% from current price levels.
