uploads/2016/03/lkq-pm.jpg

LKQ Acquires Pittsburgh Glass Works, Moody’s Changes Outlook

By

Updated

Price movement of LKQ

LKQ Corporation (LKQ) has a market cap of $8.5 billion. LKQ fell by 2.0% to close at $27.60 per share on February 29, 2016. The price movements on weekly, monthly, and year-to-date bases are 6.2%, 4.3%, and -6.9%, respectively.

Technically, LKQ is trading 6.0% above its 20-day moving average, 2.2% above its 50-day moving average, and -4.9% below its 200-day moving average.

The iShares Russell Mid-Cap Growth Index ETF (IWP) invests 0.29% of its holdings in LKQ. The ETF tracks a market-cap-weighted index of growth companies chosen from a set of the 800 smallest Russell 1000 companies. The YTD price movement of IWP was -5.5% as of February 26, 2016.

The Vanguard Mid-Cap ETF (VO) invests 0.26% of its holdings in LKQ. The ETF tracks the CRSP US Mid-Cap Index, a diversified index of mid-cap US companies.

The market caps of LKQ’s competitors are as follows:

  • O’Reilly Automotive (ORLY) – $25.4 billion
  • Genuine Parts Company (GPC) – $13.6 billion
  • Copart (CPRT) – $4.2 billion
Article continues below advertisement

LKQ acquires Pittsburgh Glass Works

LKQ has signed a definitive agreement to acquire Pittsburgh Glass Works from private equity company Kohlberg & Company and PPG Industries (PPG) for an enterprise value of $635 million. This transaction will be completed in the second quarter of 2016 and is subject to customary closing conditions and necessary regulatory approvals.

After the announcement of the Pittsburgh Glass Works acquisition, Moody’s Investors Service downgraded LKQ Corporation’s rating outlook to negative from stable and affirmed all debt ratings, with a Corporate Family Rating of Ba1, a senior unsecured rating of Ba2, and a Speculative Grade Liquidity Rating of SGL-2.

Performance of LKQ in 4Q15 and 2015

LKQ reported fiscal 4Q15 revenue of $1.74 billion, a rise of 3.8% from the revenue of $1.68 billion in fiscal 4Q14. In fiscal 4Q15, revenues from its North America, Europe, specialty, and parts and services segments rose by 7.9%, 4,6%, 16.1%, and 8.0%, respectively, from fiscal 4Q14.

Its net income and EPS (earnings per share) rose to $95.1 million and $0.31, respectively, in fiscal 4Q15, compared with $80.5 million and $0.26, respectively, in fiscal 4Q14.

Article continues below advertisement

Fiscal 2015 results

In fiscal 2015, LKQ reported revenue of $7.2 billion, a rise of 6.7% YoY (year-over-year). It reported restructuring and acquisition-related expenses of $19.5 million in fiscal 2015, compared with $14.8 million in fiscal 2014.

Its net income and EPS rose to $423.2 million and $1.38, respectively, in fiscal 2015, compared with $381.5 million and $1.25, respectively, in fiscal 2014.

Meanwhile, its cash and cash equivalents fell by 23.7% and its inventories rose by 8.6% in fiscal 2015. In fiscal 2015, its current ratio rose to 3.1x and its long-term debt-to-equity ratio fell to 0.49x, compared with 3.0x and 0.66x, respectively, in fiscal 2014.

The PE (price-to-earnings) and PBV (price-to-book value) ratios of LKQ were 20.0x and 2.7x, respectively, as of February 29, 2016.

Projections

The company has made the following projections for fiscal 2016:

  • organic revenue growth for parts and services in the range of 6%–8%
  • adjusted net income in the range of $490 million–$520 million
  • adjusted EPS in the range of $1.59–$1.69
  • cash flow operations in the range of $520 million–$550 million
  • capital expenditures in the range of $170 million–$180 million

In the next part of this series, we’ll look at Campbell Soup’s performance.

Advertisement

More From Market Realist