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LKQ Corporation LKQ is likely to gain from acquisitions and restructuring plans amid declining repairable claims.
Let us see why you should retain this Zacks Rank #3 (Hold) stock in your portfolio for now.
Acquisitions & Restructuring Plan to Drive LKQ’s Prospects
LKQ’s strategic acquisitions are boosting its prospects. The acquisition of Uni-Select Inc. for $2.1 billion, completed on Aug. 1, 2023, has bolstered its global automotive vehicle parts distribution business. It will solidify LKQ’s pre-existing business operations in Quebec and is expected to boost revenue growth and improve margins. The company expedited the integration of FinishMaster, a subsidiary of Uni-Select, which will help it increase annualized Uni-Select synergies to $65 million by the end of 2026.
The company’s restructuring plan, focusing on exiting non-strategic businesses, streamlining operations and optimizing logistics, bodes well. In Europe, it resulted in increased efficiency of the logistics footprint, leading to a reduction in facilities and overhead costs. In North America, the company is aligning its cost structure with demand by rationalizing overhead costs. These actions aim to simplify the business, enhance efficiency and boost margins to maximize shareholder returns.
LKQ, one of the leading providers of replacement parts, components and systems required to repair and maintain vehicles, completed its mega-yard expansion in Crystal River, FL, and began operations on the newly expanded site in December. Additionally, it acquired land and started building two mega-yards in Illinois and Washington, scheduled to open in 2026. These expansions will support growth in recycled parts and enhance productivity.
The integration of expertise from its North American and European segments is expected to enhance LKQ’s procurement, remanufacturing, product development and growth in North American hard parts while creating opportunities in electrification. It will also deliver financial advantages, such as vendor financing and reduced capital costs.
Investor-friendly moves also boost shareholders’ optimism. The company is committed to maximizing shareholders’ value. It returned $678 million to its shareholders through dividends and share repurchases in 2024. It also has an active buyback program in place. LKQ has bought back $2.8 billion of stock since initiating its first repurchase plan in October 2018. In October 2024, it boosted its stock repurchase authorization by $1 billion. And as of Dec. 31, 2024, LKQ had $1.7 billion remaining on the stock buyback authorization.