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LKQ Corporation’s Top and Bottom Lines Rose in 2Q16

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Price movement

LKQ Corporation (LKQ) rose by 3.2% to close at $34.39 per share during the fourth week of July 2016. The stock’s weekly, monthly, and year-to-date (or YTD) price movements were 3.2%, 9.7%, and 16.1%, respectively, as of July 29. LKQ is trading 4.4% above its 20-day moving average, 5.6% above its 50-day moving average, and 14.0% below its 200-day moving average.

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Related ETF and peers

The Vanguard Mid-Cap ETF (VO) invests 0.28% 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 8.3% on July 29.

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

  • O’Reilly Automotive (ORLY) — $27.9 billion
  • Genuine Parts Company (GPC) — $15.4 billion
  • Copart (CPRT) — $5.5 billion

Performance of LKQ in 2Q16

LKQ reported 2Q16 revenue of $2.5 billion, a rise of 38.9% from the revenue of $1.8 billion in 2Q15. Revenue of the North America, Europe, and specialty segments rose by 5.6%, 61.8%, and 18.5%, respectively, between 2Q15 and 2Q16. The company’s gross profit margin fell by 4.5% and its operating income rose by 21.4%. It reported restructuring and acquisition-related expenses of $9.1 million in 2Q16, compared with $1.7 million in 2Q15.

Its net income and EPS (earnings per share) rose to $140.7 million and $0.46, respectively, in 2Q16, compared with $119.7 million and $0.39 in 2Q15. It reported adjusted EPS of $0.55 in 2Q16, a rise of 34.2% from 2Q15.

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LKQ’s net receivables and inventories rose by 68.6% and 21.5%, respectively, between 4Q15 and 2Q16. It reported cash and cash equivalents of $273.2 million in 2Q16, compared with $87.4 million in 4Q15. Its current ratio fell to 2.8x and its debt-to-equity ratio rose to 1.5x in 2Q16, compared with 3.1x and 0.81x, respectively, in 4Q15.

Projections

The company has made the following projections for fiscal 2016:

  • organic revenue growth for parts and service in the range of 5.5% to 7.0%
  • adjusted net income in the range of $555 million to $580 million
  • adjusted EPS in the range of $1.79 to $1.87
  • cash flow operations in the range of $585 million to $635 million
  • capital expenditures in the range of $200 million to $225 million

For an ongoing analysis of this sector, please visit Market Realist’s Consumer Discretionary page.

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