Automotive parts company LKQ (NASDAQ:LKQ) missed Wall Street’s revenue expectations in Q1 CY2025, with sales falling 6.5% year on year to $3.46 billion. Its non-GAAP profit of $0.79 per share was 1.5% above analysts’ consensus estimates.
Revenue: $3.46 billion vs analyst estimates of $3.61 billion (6.5% year-on-year decline, 4.1% miss)
Adjusted EPS: $0.79 vs analyst estimates of $0.78 (1.5% beat)
Adjusted EBITDA: $392 million vs analyst estimates of $396.2 million (11.3% margin, 1.1% miss)
Management reiterated its full-year Adjusted EPS guidance of $3.55 at the midpoint
EBITDA guidance for the full year is $825 million at the midpoint, below analyst estimates of $1.73 billion
Operating Margin: 8.3%, in line with the same quarter last year
Free Cash Flow was -$57 million, down from $187 million in the same quarter last year
Organic Revenue fell 4.1% year on year (-1.1% in the same quarter last year)
Market Capitalization: $10.89 billion
ANTIOCH, Tenn., April 24, 2025 (GLOBE NEWSWIRE) -- LKQ Corporation (Nasdaq: LKQ) today reported first quarter 2025 financial results. “We are pleased with our first-quarter performance and are driven to sustain this momentum as we advance our operational excellence initiatives and generate long-term value despite market uncertainties. By embracing these initiatives, even with lower demand, the team's unwavering focus on optimizing the Company’s cost structure is reflected in our year-over-year EBITDA percentage growth” stated Justin Jude, President and Chief Executive Officer.
Company Overview
A global distributor of vehicle parts and accessories, LKQ (NASDAQ:LKQ) offers its customers a comprehensive selection of high-quality, affordably priced automobile products.
Specialized Consumer Services
Some consumer discretionary companies don’t fall neatly into a category because their products or services are unique. Although their offerings may be niche, these companies have often found more efficient or technology-enabled ways of doing or selling something that has existed for a while. Technology can be a double-edged sword, though, as it may lower the barriers to entry for new competitors and allow them to do serve customers better.
Sales Growth
Reviewing a company’s long-term sales performance reveals insights into its quality. Any business can have short-term success, but a top-tier one grows for years. Regrettably, LKQ’s sales grew at a weak 2.6% compounded annual growth rate over the last five years. This fell short of our benchmarks and is a tough starting point for our analysis.
LKQ Quarterly Revenue
Long-term growth is the most important, but within consumer discretionary, product cycles are short and revenue can be hit-driven due to rapidly changing trends and consumer preferences. LKQ’s annualized revenue growth of 5% over the last two years is above its five-year trend, but we were still disappointed by the results.
LKQ Year-On-Year Revenue Growth
We can dig further into the company’s sales dynamics by analyzing its organic revenue, which strips out one-time events like acquisitions and currency fluctuations that don’t accurately reflect its fundamentals. Over the last two years, LKQ’s organic revenue was flat. Because this number is lower than its normal revenue growth, we can see that some mixture of acquisitions and foreign exchange rates boosted its headline results.
LKQ Organic Revenue Growth
This quarter, LKQ missed Wall Street’s estimates and reported a rather uninspiring 6.5% year-on-year revenue decline, generating $3.46 billion of revenue.
Looking ahead, sell-side analysts expect revenue to grow 2.5% over the next 12 months, a slight deceleration versus the last two years. This projection doesn't excite us and implies its products and services will see some demand headwinds.
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Operating Margin
LKQ’s operating margin might fluctuated slightly over the last 12 months but has remained more or less the same, averaging 8.7% over the last two years. This profitability was mediocre for a consumer discretionary business and caused by its suboptimal cost structure.
LKQ Trailing 12-Month Operating Margin (GAAP)
In Q1, LKQ generated an operating profit margin of 8.3%, in line with the same quarter last year. This indicates the company’s overall cost structure has been relatively stable.
Earnings Per Share
We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.
LKQ’s EPS grew at an unimpressive 7.6% compounded annual growth rate over the last five years. This performance was better than its flat revenue but doesn’t tell us much about its business quality because its operating margin didn’t expand.
LKQ Trailing 12-Month EPS (Non-GAAP)
In Q1, LKQ reported EPS at $0.79, down from $0.82 in the same quarter last year. Despite falling year on year, this print beat analysts’ estimates by 1.5%. Over the next 12 months, Wall Street expects LKQ’s full-year EPS of $3.44 to grow 6.5%.
Key Takeaways from LKQ’s Q1 Results
We struggled to find many positives in these results. Its full-year EBITDA guidance missed significantly and its revenue fell short of Wall Street’s estimates. Overall, this quarter could have been better. The stock traded down 5% to $40.02 immediately following the results.
