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What’s LKQ Doing to Increase Visibility in the European Market?

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Price movement of LKQ

LKQ Corporation (LKQ) has a market cap of $9.5 billion. LKQ rose by 0.13% to close at $30.87 per share on March 21, 2016. The price movements on weekly, monthly, and year-to-date (or YTD) bases were 0.13%, 17.3%, and 4.2%, respectively.

Technically, LKQ is trading 5.5% above its 20-day moving average, 12.8% above its 50-day moving average, and 6.0% above its 200-day moving average.

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 YTD price movement of VO was 0.25% as of March 18, 2016.

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

  • O’Reilly Automotive (ORLY): $26.2 billion
  • Genuine Parts Company (GPC): $14.6 billion
  • Copart (CPRT): $4.6 billion
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LKQ has acquired Rhiag-Inter Auto Parts

LKQ has completed the acquisition of Rhiag-Inter Auto Parts Italia SpA, a distributor of spare parts for passenger cars and commercial vehicles. The acquisition, which closed on March 18, 2016, will help LKQ expand in the European market.

Performance of LKQ in 4Q15 and 2015

LKQ reported fiscal 4Q15 revenue of $1.8 billion, a rise of 3.8% compared to revenue of $1.7 billion in fiscal 4Q14. Revenue of North America, Europe, specialty, and parts and services rose by 7.9%, 4,6%, 16.1%, and 8.0%, respectively, in fiscal 4Q15, compared to fiscal 4Q14.

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

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Fiscal 2015 results

In fiscal 2015, LKQ reported revenue of $7.2 billion, a rise of 6.7% YoY (year-over-year). Its net income and EPS rose to $423.2 million and $1.38, respectively, in fiscal 2015, compared to $381.5 million and $1.25, respectively, in fiscal 2014.

The company’s cash and cash equivalents fell 23.7%, and inventories rose 8.6% in fiscal 2015. Its current ratio rose to 3.1x, and long-term debt-to-equity ratio fell to 0.49x in fiscal 2015. This compares to a ratio and long-term debt-to-equity ratio of 3.0x and 0.66x, respectively, in fiscal 2014.

The price-to-earnings and price-to-book value ratios of LKQ are 22.4x and 3.0x, respectively, as of March 21, 2016.

Projections

The company has made the following projections for fiscal 2016:

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

In the final part of our series, we’ll look at Moody’s Baa3 rating for Newell Rubbermaid’s senior unsecured notes.

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