Download LKQ CORP - TheStreet

June 4, 2017
NASDAQ: LKQ
LKQ CORP
BUY
A+
A
A-
HOLD
B+
B
Annual Dividend Rate
NA
B-
C+
C
Annual Dividend Yield
NA
SELL
C-
D+
D
Beta
NA
Sector: Consumer Goods & Svcs
LKQ BUSINESS DESCRIPTION
LKQ Corporation, together with its subsidiaries,
distributes replacement parts, components, and
systems used in the repair and maintenance of
vehicles in North America, Europe, and Taiwan. It
operates in three segments: North America,
Europe, and Specialty.
STOCK PERFORMANCE (%)
3 Mo.
Price Change
0.24
Weekly Price: (US$)
D-
E+
E
E-
Market Capitalization
$10.0 Billion
Sub-Industry: Distributors
SMA (50)
F
BUY
52-Week Range
$27.85-$36.35
RATING SINCE
TARGET PRICE
06/01/2010
$37.35
Price as of 6/1/2017
$32.34
Source: S&P
SMA (100)
1 Year
2 Years
TARGET
TARGET
TARGETPRICE
PRICE
PRICE$37.35
$37.35
$37.35
TARGET
38
35
33
30
1 Yr.
-1.08
3 Yr (Ann)
5.25
12 Mo.
22.68
13.95
10.71
3 Yr CAGR
17.92
13.74
12.45
28
GROWTH (%)
Last Qtr
21.92
21.49
21.62
Revenues
Net Income
EPS
25
Rating History
BUY
Volume in Millions
75
RETURN ON EQUITY (%)
LKQ
13.43
13.24
13.81
Q1 2017
Q1 2016
Q1 2015
Ind Avg
32.66
28.96
25.15
S&P 500
12.81
11.95
14.20
20.86
23.24
25.70
LKQ
Ind Avg
S&P 500
2016
0
2017
COMPUSTAT for Price and Volume, TheStreet Ratings, Inc. for Rating History
HIGHLIGHTS
The revenue growth came in higher than the industry average of 0.3%. Since the same quarter one year prior,
revenues rose by 21.9%. This growth in revenue appears to have trickled down to the company's bottom line,
improving the earnings per share.
2016
The net income growth from the same quarter one year ago has significantly exceeded that of the
Distributors industry average, but is less than that of the S&P 500. The net income increased by 21.5% when
compared to the same quarter one year prior, going from $112.17 million to $136.28 million.
Q1 0.45
Q4 0.31
Q3 0.33
Q2 0.46
LKQ CORP has improved earnings per share by 21.6% in the most recent quarter compared to the same
quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the
past two years. We feel that this trend should continue. During the past fiscal year, LKQ CORP increased its
bottom line by earning $1.47 versus $1.38 in the prior year. This year, the market expects an improvement in
earnings ($1.87 versus $1.47).
Q1 0.37
Q4 0.31
Q3 0.33
Q2 0.39
EPS ANALYSIS¹ ($)
Q1 0.35
25
RECOMMENDATION
We rate LKQ CORP (LKQ) a BUY. This is driven by a number of strengths, which we believe should have a
greater impact than any weaknesses, and should give investors a better performance opportunity than most
stocks we cover. The company's strengths can be seen in multiple areas, such as its robust revenue growth,
growth in earnings per share, increase in net income, expanding profit margins and good cash flow from
operations. We feel its strengths outweigh the fact that the company has had lackluster performance in the
stock itself.
P/E COMPARISON
2015
50
2017
NA = not available NM = not meaningful
1 Compustat fiscal year convention is used for all fundamental
data items.
39.70% is the gross profit margin for LKQ CORP which we consider to be strong. It has increased from the
same quarter the previous year. Along with this, the net profit margin of 5.81% is above that of the industry
average.
Net operating cash flow has increased to $172.29 million or 32.32% when compared to the same quarter last
year. In addition, LKQ CORP has also vastly surpassed the industry average cash flow growth rate of -20.97%.
This report is for information purposes only and should not be considered a solicitation to buy or sell any security. Neither TheStreet Ratings nor any other party guarantees its accuracy
or makes warranties regarding results from its usage. Redistribution is prohibited without the express written consent of TheStreet Ratings. Copyright(c) 2006-2016. All rights reserved.
Report Date: June 4, 2017
PAGE 1
June 4, 2017
NASDAQ: LKQ
LKQ CORP
Sector: Consumer Goods & Svcs Distributors Source: S&P
Annual Dividend Rate
NA
Annual Dividend Yield
NA
PEER GROUP ANALYSIS
250%
FA
RA
VO
BL
E
FA
B
RA
VO
LE
-50%
LKQ
GPC
CORE
DIT POOL
WEYS
12.5%
EBITDA Margin (TTM)
Companies with higher EBITDA margins and
revenue growth rates are outperforming companies
with lower EBITDA margins and revenue growth
rates. Companies for this scatter plot have a market
capitalization between $29.2 Million and $13.9
Billion. Companies with NA or NM values do not
appear.
*EBITDA – Earnings Before Interest, Taxes, Depreciation and
Amortization.
Price as of 6/1/2017
$32.34
The industry is a competitive, cyclical, and fragmented $2.5 trillion enterprise, which includes numerous small
firms and several large, full-service wholesale distributors. Companies face competition from online retailers
and manufacturers, such as Coca-Cola (KO) bottlers and Frito Lay, a unit of PepsiCo (PEP), which deliver their
products directly. The range and quality of services provided, variety of products offered, inventory
sufficiency, reliability of deliveries, store location, and prices are factors that define competitive position.
Genuine Parts (GPC), LKQ (LKQ), Core-Mark Holding Co (CORE), and Pool Corp (POOL) are prominent players.
Rising costs and stiff competition have pushed wholesalers to offer more value-added services and to
outsource core business processes. Companies focus on sales and earnings growth through new product
offerings, product line expansion, market expansion, and a variety of margin enhancing and cost savings
initiatives.
Distributors often depend upon a few suppliers for the majority of purchases. For example, the two top
suppliers of Core-Mark represented more than 40% of purchases in recent years. Quality and pricing of
merchandise offered is strongly influenced by vendors and consumer demand for retail goods drives demand
for wholesale distribution. The distributor industry has experienced a dramatic loss of power as retailers and
manufacturers embrace consolidation.
Wholesale distributors benefit from unusually high commodity price inflation, which has boosted revenue in
recent periods. Technology advancement helps distributors reduce costs associated with order processing,
inventory management, customer service, and administrative processes. However, online retailing,
particularly in the entertainment market, has reduced the need for middlemen as manufacturers now deliver
products directly to consumers’ homes.
REVENUE GROWTH AND EARNINGS YIELD
250%
52-Week Range
$27.85-$36.35
The distributor industry is comprised of companies that engage in the wholesale distribution of general
merchandise and automobiles, excluding food, healthcare, technology, and capital goods. In addition to
distributing products from manufacturers to retailers, distributors provide retailers with inventory
management services, access to trade credit, and the option to place small quantity orders. Types of
wholesale operations include merchant wholesalers, who take title to goods and then resell them, sales
branches, which are maintained by manufacturing operations, and agents or brokers, who buy and sell
merchandise for others. Wholesale distributors supply about half of the total in-store sales for convenience
retail stores.
FENX
UN
Revenue Growth (TTM)
Market Capitalization
$10.0 Billion
INDUSTRY ANALYSIS
REVENUE GROWTH AND EBITDA MARGIN*
-12.5%
Beta
NA
FENX
FA
RA
VO
BL
In economic recessions, slowdowns in sales trigger production cuts as businesses drop inventories to mirror
sales thus constricting distribution revenue. As consumer spending returns and with it demand for wholesale
services during an inventory rebuilding period distribution business pace expands. Ongoing consolidation,
and cost-cutting initiatives may help future profitability.
B
RA
VO
LE
-50%
FA
Revenue Growth (TTM)
E
UN
-200%
EDUC
PEER GROUP: Distributors
CORE
LKQ
POOL
GPC
DIT
WEYS
Ticker
LKQ
DIT
POOL
EDUC
FENX
WEYS
CORE
GPC
25%
Earnings Yield (TTM)
Companies that exhibit both a high earnings yield
and high revenue growth are generally more
attractive than companies with low revenue growth
and low earnings yield. Companies for this scatter
plot have revenue growth rates between -10.7% and
233.3%. Companies with NA or NM values do not
appear.
Recent
Company Name
Price ($)
LKQ CORP
32.34
AMCON DISTRIBUTING CO
101.90
POOL CORP
120.60
EDUCATIONAL DEVELOPMENT CO 10.05
FENIX PARTS INC
1.45
WEYCO GROUP INC
27.72
CORE MARK HOLDING CO INC
34.91
GENUINE PARTS CO
94.11
Market
Cap ($M)
9,970
69
4,987
41
29
288
1,617
13,871
Price/
Earnings
20.86
14.23
33.59
19.71
NM
18.24
32.03
20.37
Net Sales
TTM ($M)
9,005.40
903.52
2,601.99
96.32
129.13
287.15
11,860.80
15,527.09
Net Income
TTM ($M)
488.08
5.01
154.87
2.10
-54.63
16.00
50.60
689.38
The peer group comparison is based on Major Distributors companies of comparable size.
This report is for information purposes only and should not be considered a solicitation to buy or sell any security. Neither TheStreet Ratings nor any other party guarantees its accuracy
or makes warranties regarding results from its usage. Redistribution is prohibited without the express written consent of TheStreet Ratings. Copyright(c) 2006-2016. All rights reserved.
Report Date: June 4, 2017
PAGE 2
June 4, 2017
NASDAQ: LKQ
LKQ CORP
Sector: Consumer Goods & Svcs Distributors Source: S&P
Annual Dividend Rate
NA
Annual Dividend Yield
NA
COMPANY DESCRIPTION
LKQ Corporation, together with its subsidiaries,
distributes replacement parts, components, and systems
used in the repair and maintenance of vehicles in North
America, Europe, and Taiwan. It operates in three
segments: North America, Europe, and Specialty. The
company distributes bumper covers, automotive body
panels, lights, and automotive glass products, such as
windshields; salvage products, including mechanical and
collision parts comprising engines, transmissions, door
assemblies, sheet metal products, lights, and bumper
assemblies; scrap metal and other materials to metals
recyclers; and brake pads, discs and sensors, clutches,
steering and suspension products, filters, and oil and
automotive fluids, as well as electrical products,
including spark plugs and batteries. It also operates self
service retail operations under the LKQ Pick Your Part
name. In addition, the company distributes recreational
vehicle appliances and air conditioners, towing hitches,
truck bed covers, vehicle protection products, cargo
management products, wheels, tires, and suspension
products. It primarily serves collision and mechanical
repair shops, new and used car dealerships, as well as
retail customers. The company was founded in 1998 and
is headquartered in Chicago, Illinois.
LKQ CORP
500 West Madison Street, Suite 2800
Chicago, IL 60661
USA
Phone: 312-621-1950
Fax: 312-621-1969
http://www.lkqcorp.com
Beta
NA
Market Capitalization
$10.0 Billion
52-Week Range
$27.85-$36.35
Price as of 6/1/2017
$32.34
STOCK-AT-A-GLANCE
Below is a summary of the major fundamental and technical factors we consider when determining our
overall recommendation of LKQ shares. It is provided in order to give you a deeper understanding of our
rating methodology as well as to paint a more complete picture of a stock's strengths and weaknesses. It is
important to note, however, that these factors only tell part of the story. To gain an even more comprehensive
understanding of our stance on the stock, these factors must be assessed in combination with the stock’s
valuation. Please refer to our Valuation section on page 5 for further information.
FACTOR
SCORE
5.0
Growth
out of 5 stars
weak
Measures the growth of both the company's income statement and
cash flow. On this factor, LKQ has a growth score better than 90% of the
stocks we rate.
strong
2.0
Total Return
out of 5 stars
weak
Measures the historical price movement of the stock. The stock
performance of this company has beaten 30% of the companies we
cover.
strong
4.0
Efficiency
out of 5 stars
weak
Measures the strength and historic growth of a company's return on
invested capital. The company has generated more income per dollar of
capital than 70% of the companies we review.
strong
3.0
Price volatility
out of 5 stars
weak
Measures the volatility of the company's stock price historically. The
stock is less volatile than 50% of the stocks we monitor.
strong
4.5
Solvency
out of 5 stars
weak
Measures the solvency of the company based on several ratios. The
company is more solvent than 80% of the companies we analyze.
strong
0.5
Income
out of 5 stars
weak
Measures dividend yield and payouts to shareholders. This company
pays no dividends.
strong
THESTREET RATINGS RESEARCH METHODOLOGY
TheStreet Ratings' stock model projects a stock's total return potential over a 12-month period including both
price appreciation and dividends. Our Buy, Hold or Sell ratings designate how we expect these stocks to
perform against a general benchmark of the equities market and interest rates. While our model is
quantitative, it utilizes both subjective and objective elements. For instance, subjective elements include
expected equities market returns, future interest rates, implied industry outlook and forecasted company
earnings. Objective elements include volatility of past operating revenues, financial strength, and company
cash flows.
Our model gauges the relationship between risk and reward in several ways, including: the pricing drawdown
as compared to potential profit volatility, i.e.how much one is willing to risk in order to earn profits; the level of
acceptable volatility for highly performing stocks; the current valuation as compared to projected earnings
growth; and the financial strength of the underlying company as compared to its stock's valuation as
compared to projected earnings growth; and the financial strength of the underlying company as compared
to its stock's performance. These and many more derived observations are then combined, ranked, weighted,
and scenario-tested to create a more complete analysis. The result is a systematic and disciplined method of
selecting stocks.
This report is for information purposes only and should not be considered a solicitation to buy or sell any security. Neither TheStreet Ratings nor any other party guarantees its accuracy
or makes warranties regarding results from its usage. Redistribution is prohibited without the express written consent of TheStreet Ratings. Copyright(c) 2006-2016. All rights reserved.
Report Date: June 4, 2017
PAGE 3
June 4, 2017
NASDAQ: LKQ
LKQ CORP
Sector: Consumer Goods & Svcs Distributors Source: S&P
Annual Dividend Rate
NA
Annual Dividend Yield
NA
Consensus EPS Estimates² ($)
IBES consensus estimates are provided by Thomson Financial
0.52
1.87 E
2.10 E
Q2 FY17
2017(E)
2018(E)
Market Capitalization
$10.0 Billion
52-Week Range
$27.85-$36.35
Price as of 6/1/2017
$32.34
FINANCIAL ANALYSIS
LKQ CORP's gross profit margin for the first quarter of its fiscal year 2017 is essentially unchanged when
compared to the same period a year ago. The company managed to grow both sales and net income at a
faster pace than the average competitor in its industry this quarter as compared to the same quarter a year
ago. LKQ CORP has average liquidity. Currently, the Quick Ratio is 1.07 which shows that technically this
company has the ability to cover short-term cash needs. The company's liquidity has increased from the
same period last year, indicating improving cash flow.
During the same period, stockholders' equity ("net worth") has increased by 11.51% from the same quarter last
year. Together, the key liquidity measurements indicate that it is relatively unlikely that the company will face
financial difficulties in the near future.
STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the
next 12-months. To learn more visit www.TheStreetRatings.com.
INCOME STATEMENT
Net Sales ($mil)
EBITDA ($mil)
EBIT ($mil)
Net Income ($mil)
Beta
NA
Q1 FY17
2,342.84
287.28
238.62
136.28
Q1 FY16
1,921.48
233.65
200.48
112.17
Q1 FY17
264.61
8,122.25
3,025.27
3,606.87
Q1 FY16
229.22
7,356.86
2,818.56
3,234.41
Q1 FY17
39.70%
12.26%
10.19%
1.11
6.00%
13.43%
Q1 FY16
39.65%
12.15%
10.43%
1.00
5.82%
13.24%
Q1 FY17
2.86
0.46
23.99
9.95
Q1 FY16
2.85
0.47
14.59
13.74
Q1 FY17
308
0.00
0.45
11.70
NA
2,265,390
Q1 FY16
307
0.00
0.37
10.55
NA
2,280,122
BALANCE SHEET
Cash & Equiv. ($mil)
Total Assets ($mil)
Total Debt ($mil)
Equity ($mil)
PROFITABILITY
Gross Profit Margin
EBITDA Margin
Operating Margin
Sales Turnover
Return on Assets
Return on Equity
DEBT
Current Ratio
Debt/Capital
Interest Expense
Interest Coverage
SHARE DATA
Shares outstanding (mil)
Div / share
EPS
Book value / share
Institutional Own %
Avg Daily Volume
2 Sum of quarterly figures may not match annual estimates due to
use of median consensus estimates.
This report is for information purposes only and should not be considered a solicitation to buy or sell any security. Neither TheStreet Ratings nor any other party guarantees its accuracy
or makes warranties regarding results from its usage. Redistribution is prohibited without the express written consent of TheStreet Ratings. Copyright(c) 2006-2016. All rights reserved.
Report Date: June 4, 2017
PAGE 4
June 4, 2017
NASDAQ: LKQ
LKQ CORP
Sector: Consumer Goods & Svcs Distributors Source: S&P
Annual Dividend Rate
NA
Annual Dividend Yield
NA
RATINGS HISTORY
Our rating for LKQ CORP has not changed since
4/3/2009. As of 6/1/2017, the stock was trading at a
price of $32.34 which is 11.0% below its 52-week
high of $36.35 and 16.1% above its 52-week low of
$27.85.
2 Year Chart
Beta
NA
Market Capitalization
$10.0 Billion
BUY: $28.81
Price/Earnings
1
2
3
premium
$30
2015
4
5
LKQ 20.86
Peers 23.24
• Discount. A lower P/E ratio than its peers can
signify a less expensive stock or lower growth
expectations.
• LKQ is trading at a discount to its peers.
Price/Projected Earnings
From
Buy
To
Buy
RATINGS DEFINITIONS &
DISTRIBUTION OF THESTREET RATINGS
3
43.83% Buy - We believe that this stock has the
opportunity to appreciate and produce a total return of
more than 10% over the next 12 months.
30.08% Hold - We do not believe this stock offers
conclusive evidence to warrant the purchase or sale of
shares at this time and that its likelihood of positive total
return is roughly in balance with the risk of loss.
26.10% Sell - We believe that this stock is likely to
decline by more than 10% over the next 12 months, with
the risk involved too great to compensate for any
possible returns.
4
5
Price/Book
1
2
3
premium
4
5
Price/Sales
1
2
premium
3
4
5
Price to Earnings/Growth
4
5
discount
1
2
3
premium
4
5
discount
LKQ 0.77
Peers 2.42
• Discount. The PEG ratio is the stock’s P/E divided
by the consensus estimate of long-term earnings
growth. Faster growth can justify higher price
multiples.
• LKQ trades at a significant discount to its peers.
Earnings Growth
1
2
3
4
lower
5
higher
LKQ 10.71
Peers 5.43
• Higher. Elevated earnings growth rates can lead to
capital appreciation and justify higher
price-to-earnings ratios.
• LKQ is expected to have an earnings growth rate
that significantly exceeds its peers.
Sales Growth
discount
LKQ 1.11
Peers 1.09
• Average. In the absence of P/E and P/B multiples,
the price-to-sales ratio can display the value
investors are placing on each dollar of sales.
• LKQ is trading at a valuation on par with its industry
on this measurement.
3
LKQ 14.71
Peers 24.41
• Discount. The P/CF ratio, a stock’s price divided by
the company's cash flow from operations, is useful
for comparing companies with different capital
requirements or financing structures.
• LKQ is trading at a significant discount to its peers.
discount
LKQ 2.76
Peers 6.62
• Discount. A lower price-to-book ratio makes a
stock more attractive to investors seeking stocks
with lower market values per dollar of equity on the
balance sheet.
• LKQ is trading at a significant discount to its peers.
2
premium
discount
LKQ 15.40
Peers 20.50
• Discount. A lower price-to-projected earnings ratio
than its peers can signify a less expensive stock or
lower future growth expectations.
• LKQ is trading at a discount to its peers.
(as of 6/1/2017)
Research Contact: 212-321-5381
Sales Contact: 866-321-8726
2
premium
Price reflects the closing price as of the date listed, if available
TheStreet Ratings
14 Wall Street, 15th Floor
New York, NY 10005
www.thestreet.com
1
1
Price/CashFlow
discount
2016
MOST RECENT RATINGS CHANGES
Date
Price
Action
6/1/15
$28.81 No Change
Price as of 6/1/2017
$32.34
VALUATION
BUY. This stock's P/E ratio indicates a discount compared to an average of 23.24 for the Distributors industry
and a discount compared to the S&P 500 average of 25.70. To use another comparison, its price-to-book ratio
of 2.76 indicates a discount versus the S&P 500 average of 3.08 and a significant discount versus the industry
average of 6.62. The current price-to-sales ratio is well below the S&P 500 average, but above the industry
average. Upon assessment of these and other key valuation criteria, LKQ CORP proves to trade at a discount
to investment alternatives within the industry.
$40
$35
52-Week Range
$27.85-$36.35
1
2
3
lower
4
5
higher
LKQ 22.68
Peers 10.92
• Higher. A sales growth rate that exceeds the
industry implies that a company is gaining market
share.
• LKQ has a sales growth rate that significantly
exceeds its peers.
DISCLAIMER:
The opinions and information contained herein have been obtained or derived from sources believed to be reliable, but
TheStreet Ratings cannot guarantee its accuracy and completeness, and that of the opinions based thereon. Data is provided
via the COMPUSTAT® Xpressfeed product from Standard &Poor's, a division of The McGraw-Hill Companies, Inc., as well as
other third-party data providers.
TheStreet Ratings is a division of TheStreet, Inc., which is a publisher. This research report contains opinions and is provided
for informational purposes only. You should not rely solely upon the research herein for purposes of transacting securities or
other investments, and you are encouraged to conduct your own research and due diligence, and to seek the advice of a
qualified securities professional, before you make any investment. None of the information contained in this report constitutes,
or is intended to constitute a recommendation by TheStreet Ratings of any particular security or trading strategy or a
determination by TheStreet Ratings that any security or trading strategy is suitable for any specific person. To the extent any of
the information contained herein may be deemed to be investment advice, such information is impersonal and not tailored to the
investment needs of any specific person. Your use of this report is governed by TheStreet, Inc.'s Terms of Use found at
http://www.thestreet.com/static/about/terms-of-use.html.
This report is for information purposes only and should not be considered a solicitation to buy or sell any security. Neither TheStreet Ratings nor any other party guarantees its accuracy
or makes warranties regarding results from its usage. Redistribution is prohibited without the express written consent of TheStreet Ratings. Copyright(c) 2006-2016. All rights reserved.
Report Date: June 4, 2017
PAGE 5