What's in the Offing for LKQ Corp (LKQ) This Earnings Season?

LKQ Corporation LKQ is slated to release third-quarter 2020 results on Oct 29, before market open. The Zacks Consensus Estimate for the quarter’s earnings is pegged at 51 cents per share on revenues of $2.93 billion.

This aftermarket auto parts distributor delivered better-than-anticipated earnings in the last reported quarter on robust revenues from the parts and services segment.

The company surpassed estimates in all of the preceding four quarters, the average beat being 77.05%. This is depicted in the graph below:

LKQ Corporation Price and EPS Surprise

LKQ Corporation Price and EPS Surprise

LKQ Corporation price-eps-surprise | LKQ Corporation Quote

Trend in Estimate Revisions

The Zacks Consensus Estimate for LKQ Corporation’s third-quarter earnings per share witnessed northbound revision of four cents in the past 60 days. However, this compares unfavorably with the year-ago quarter’s earnings of 61 cents per share, indicating a 16.4% decline, year on year. Further, the Zacks Consensus Estimate for quarterly revenues suggests a year-over-year fall of 7.01%.

Earnings Whispers

Our proven Zacks model does not conclusively predict an earnings beat for LKQ Corporation this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. However, that is not the case here as elaborated below.
Earnings ESP: LKQ Corporation has an Earnings ESP of -1.32%. This is because the Most Accurate Estimate comes in a cent lower than the Zacks Consensus Estimate. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: LKQ Corporation currently flaunts a Zacks Rank of 1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Key Factors

Heightening coronavirus fears are likely to have thwarted vehicle demand during the third quarter, in turn, dampening demand for replacement parts, components, and systems that are required to repair and maintain vehicles.

Notably, the Zacks Consensus Estimate for the company’s parts and services’ net sales is pinned at $2,815 million, calling for a 5.7% year-over-year fall.

Moreover, amid the economic slowdown, contributions across all the major segments of LKQ Corporation might have been hurt, which is likely to have eroded the company’s revenues during the quarter in discussion.
With Europe being a major market for LKQ Corporation, lower vehicle sales amid waning consumer demand and soft economic conditions are expected to have hurt the firm’s top line. The Zacks Consensus Estimate for quarterly revenues from parts and services in Europe, which has the highest contribution to the company’s revenues, is pegged at $1,408 million. This indicates a decline from the $1,451 million reported in the year-ago quarter.

The consensus estimate for revenues from parts and services in North America for the July-September quarter is pegged at $994 million, suggesting a drop from the $1,302 million recorded in third-quarter 2019.

Nonetheless, the Zacks Consensus Estimate for revenues from the specialty segment during the September-end quarter is pinned at $414 million, higher than the $395 million reported in the prior-year quarter. This projected uptick is likely to have aided the company’s top line during the quarter under review. Also, LKQ Corporation’s cost-containment efforts amid the pandemic are anticipated to have been conducive to its performance during the July-September period.

Stocks to Consider

Here are a few stocks worth considering, as these have the right combination of elements to come up with an earnings beat this time around:

Lear Corporation LEA has an Earnings ESP of +2.78% and currently sports a Zacks Rank of 1, at present. It is scheduled to report earnings results on Nov 30.

General Motors GM has an Earnings ESP of +1.25% and carries a Zacks Rank of 3 currently. The company will announce quarterly figures on Nov 5.

Cooper Tire Rubber Company CTB has an Earnings ESP of +22.1% and currently holds a Zacks Rank #3. The company is slated to release quarterly numbers on Oct 29.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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