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LKQ Corp (LKQ) to Post Q2 Earnings: What's in the Offing?

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LKQ Corporation (LKQ - Free Report) is slated to release second-quarter 2020 results on Jul 30, before the opening bell. The Zacks Consensus Estimate for the quarter’s earnings is pegged at 12 cents per share on revenues of $2.32 billion.

This aftermarket auto parts distributor delivered better-than-expected results in the last reported quarter on higher year-over-year revenues and EBITDA from the North American segment. LKQ beat estimates in each of the trailing four quarters, the average surprise being 7.80%. This is depicted in the graph below:

 
   

LKQ Corporation Price and Consensus

   
 

Which Way are the Estimates Headed?

The Zacks Consensus Estimate for LKQ’s second-quarter earnings per share has been unrevised at 12 cents in the past seven days. The figure also indicates a year-over-year slump of 81.54%. The Zacks Consensus Estimate for revenues suggests a year-over-year decrease of 28.7%.

Key Factors

LKQ is expected to have registered a decline in sales volumes amid industry headwinds during the second quarter. Heightening coronavirus fears are likely to have thwarted vehicle demand, in turn dampening demand for replacement parts, components, and systems that are required to repair and maintain vehicles. The company withdrew the 2020 guidance and suspended its share-repurchase program in response to disruptions to its supply chain due to the coronavirus crisis.

Notably, the Zacks Consensus Estimate for the company’s Automotive Parts and Services’ net sales is pegged at $1,867 million, calling for a plunge of 39.5% year on year.

Moreover, a challenging macroeconomic environment in Europe is likely to have negatively impacted its overall consumer demand in the U.K. With Europe being a major market for LKQ, lower vehicle sales amid waning consumer demand and soft economic conditions are expected to have hurt the firm’s top line.

Nonetheless, LKQ's cost-cutting efforts amid the pandemic are anticipated to have aided its margins to some extent during the April-June period. While rising elevated SG&A costs, and higher restructuring and acquisition-related expenses might have hurt the company’s quarterly performance, solid cost-containment efforts are anticipated to have offered some respite.

What the Zacks Model Says

Our proven model does not conclusively predict an earnings beat for LKQ this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. However, that is not the case here as elaborated below. You can see the complete list of today’s Zacks #1 Rank stocks here.

Earnings ESP: LKQ has an Earnings ESP of -2.04%. This is because the Most Accurate Estimate of 12 cents per share is same as the Zacks Consensus Estimate. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: LKQ carries a Zacks Rank of 3 (Hold) currently.

Stocks to Consider

Here are a few stocks worth considering, as these have the right combination of elements to come up with an earnings beat this time around:

Magna International Inc. (MGA - Free Report) has an Earnings ESP of +6.52% and carries a Zacks Rank #2 at present. The company is slated to release second-quarter 2020 earnings on Aug 7.

Genuine Parts Company (GPC - Free Report) has an Earnings ESP of +14.52% and currently carries a Zacks Rank #3. The company is scheduled to report quarterly numbers on Jul 30.

Group 1 Automotive, Inc. (GPI - Free Report) has an Earnings ESP of +114.82% and carries a Zacks Rank #3 currently. The company is set to announce earnings figures on Jul 30.

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