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LKQ Q2 Earnings Miss Estimates on Europe ERP Disruption
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Key Takeaways
LKQ missed Q2 earnings and revenue estimates as Europe ERP disruption hurt Germany results.
LKQ cut its 2026 outlook, citing a slower Germany recovery and continued U.K. and Benelux softness.
LKQ posted North America organic growth, but higher SG&A and Europe weakness pressured margins.
LKQ Corporation (LKQ - Free Report) reported second-quarter 2026 adjusted earnings of 67 cents per share, missing the Zacks Consensus Estimate of 73 cents by 8.2%. The bottom line declined 20.2% from 87 cents reported in the year-ago quarter.
Quarterly revenues fell 3% year over year to $3.41 billion and missed the consensus mark of $3.50 billion by 2.7%. Europe’s ERP implementation challenges overshadowed positive organic growth in North America and Specialty.
North America generated revenues of $1.47 billion, up from $1.44 billion in the prior-year quarter. Parts and services organic revenues increased 0.5%, marking the segment’s first quarterly organic growth since 2023.
Pricing actions to recover tariff costs and offset inflation supported sales, while repairable claims declined between 1% and 3%. Other revenues advanced 20.5% on higher metals prices and increased volumes. Alternative-parts utilization exceeded 40%, reaching a record level.
North America’s gross profit increased to $622 million from $619 million. However, gross margin contracted 40 basis points to 42.5% due to the dilutive impact of tariff-related pricing, lower vendor rebates and an unfavorable customer mix.
North America’s quarterly segment EBITDA declined to $207 million from $224 million a year earlier. The segment EBITDA margin contracted to 14.1% from 15.5%, partly reflecting a $10 million legal reserve that reduced the margin by roughly 70 basis points.
LKQ Corp Faces Europe ERP Setback
Europe’s revenues declined to $1.46 billion from $1.61 billion a year earlier. Organic parts and services revenues fell 12.6%, partly offset by a 2.1% foreign-exchange benefit and a 0.9% contribution from acquisitions and divestitures.
The rollout of a common ERP platform in Germany disrupted service and reduced quarterly revenues by an estimated $140 million. Soft demand and weaker commercial execution in the United Kingdom and Benelux added to the pressure.
Segment EBITDA fell to $109 million from $151 million, while the EBITDA margin contracted to 7.5% from 9.4%. The company estimated that the German ERP disruption lowered EBITDA by roughly $50 million, while volume pressure in the United Kingdom and Benelux reduced it by about $30 million.
LKQ Specialty Sales Rise but Costs Weigh
Specialty revenues increased to $488 million from $465 million in the second quarter of 2025. Organic growth was 4.5%, supported by higher volumes across marine, recreational vehicle and automotive product lines.
Gross profit rose to $125 million from $118 million, with the margin improving 20 basis points to 25.6%. Tariff refunds and increased volumes more than offset an unfavorable sales mix.
Despite the top-line growth, segment EBITDA declined to $33 million from $39 million. The EBITDA margin fell to 6.7% from 8.5%, reflecting an $8 million increase in credit losses and higher transportation-related expenses.
LKQ Corp Margins Contract as SG&A Climbs
Consolidated gross profit decreased 2.6% to $1.32 billion. Gross margin edged up to 38.8% from 38.6% as improved pricing and product mix in Europe helped offset weaker sales volumes.
Selling, general and administrative expenses rose 3.3% to $990 million and increased to 29% of revenues from 27.3%. North America’s costs included a $10 million legal reserve, while Europe incurred higher transportation expenses and unfavorable currency effects.
Operating income dropped 24.7% to $225 million, with the operating margin shrinking to 6.6% from 8.5%. Adjusted segment EBITDA declined 15.6% to $349 million, and the related margin contracted 160 basis points to 10.2%.
LKQ Cash Flow Improves in the Quarter
LKQ generated operating cash flow of $111 million and free cash flow of $60 million during the second quarter. For the first six months of 2026, operating cash flow totaled $55 million, while free cash flow was negative $36 million.
As of June 30, 2026, the company had $301 million in cash, down from $319 million as of Dec. 31, 2025. It had $4 billion in total debt and available liquidity of $1.93 billion. Its total leverage ratio was 2.8 times EBITDA.
LKQ returned $129 million to shareholders during the quarter, including $52 million used to repurchase 1.9 million shares and $77 million in dividends. On July 28, 2026, the company also declared a quarterly dividend of 30 cents per share.
LKQ Corp Cuts 2026 Outlook
The company now expects 2026 organic parts and services revenues to decline between 1% and 3% compared with the previous estimated range of a 0.5% decline to 1.5% growth.
Adjusted earnings per share are projected between $2.60 and $2.90, down from the prior forecast of $2.90-$3.20. Operating cash flow guidance is projected to be in the range of $825 million to $1.03 billion, down from the earlier estimate of $900 million to $1.10 billion.
Free cash flow is now expected between $625 million and $775 million compared with the previously expected range of $700-$850 million. The revised outlook assumes a more gradual recovery in Germany and continued softness in the United Kingdom and Benelux. The company’s strategic review remains active, with LKQ continuing discussions with multiple parties.
General Motors Company (GM - Free Report) reported second-quarter 2026 adjusted earnings of $3.57 per share, up 41.3% year over year. The figure beat the Zacks Consensus Estimate of $3.13 by 14.06%. Revenues increased 1.9% to $48.03 billion and surpassed the consensus estimate of $46.56 billion by 3.15%. Strong pricing, lower costs and disciplined incentives supported results. General Motors raised its full-year adjusted EBIT guidance to $14-$16 billion from $13.5-$15.5 billion. Adjusted earnings are now projected at $12-$14 per share, up from the prior range of $11.50-$13.50.
Tesla, Inc. (TSLA - Free Report) reported second-quarter 2026 adjusted earnings of 33 cents per share, which declined 17.5% year over year. The figure missed the Zacks Consensus Estimate of 50 cents by 34%. Revenues advanced 25.5% to $28.24 billion and surpassed the consensus estimate of $25.81 billion by 9.41%. Tesla expects 2026 capital expenditures to exceed $25 billion and rise further over the next two to three years.
Genuine Parts Company (GPC - Free Report) reported second-quarter 2026 adjusted earnings of $2.15 per share, beating the Zacks Consensus Estimate of $2.10 by 2.38%. The bottom line increased 2.4% from $2.10 in the year-ago quarter. Revenues rose 6% year over year to $6.54 billion and surpassed the consensus estimate of $6.39 billion by 2.36%. Genuine Parts reaffirmed its 2026 adjusted earnings guidance of $7.50-$8 per share and total sales growth outlook of 3-5.5%. Genuine Parts ended June with $2.3 billion of liquidity, including $559 million in cash.
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LKQ Q2 Earnings Miss Estimates on Europe ERP Disruption
Key Takeaways
LKQ Corporation (LKQ - Free Report) reported second-quarter 2026 adjusted earnings of 67 cents per share, missing the Zacks Consensus Estimate of 73 cents by 8.2%. The bottom line declined 20.2% from 87 cents reported in the year-ago quarter.
Quarterly revenues fell 3% year over year to $3.41 billion and missed the consensus mark of $3.50 billion by 2.7%. Europe’s ERP implementation challenges overshadowed positive organic growth in North America and Specialty.
LKQ Corporation Price, Consensus and EPS Surprise
LKQ Corporation price-consensus-eps-surprise-chart | LKQ Corporation Quote
LKQ Sees North America Return to Growth
North America generated revenues of $1.47 billion, up from $1.44 billion in the prior-year quarter. Parts and services organic revenues increased 0.5%, marking the segment’s first quarterly organic growth since 2023.
Pricing actions to recover tariff costs and offset inflation supported sales, while repairable claims declined between 1% and 3%. Other revenues advanced 20.5% on higher metals prices and increased volumes. Alternative-parts utilization exceeded 40%, reaching a record level.
North America’s gross profit increased to $622 million from $619 million. However, gross margin contracted 40 basis points to 42.5% due to the dilutive impact of tariff-related pricing, lower vendor rebates and an unfavorable customer mix.
North America’s quarterly segment EBITDA declined to $207 million from $224 million a year earlier. The segment EBITDA margin contracted to 14.1% from 15.5%, partly reflecting a $10 million legal reserve that reduced the margin by roughly 70 basis points.
LKQ Corp Faces Europe ERP Setback
Europe’s revenues declined to $1.46 billion from $1.61 billion a year earlier. Organic parts and services revenues fell 12.6%, partly offset by a 2.1% foreign-exchange benefit and a 0.9% contribution from acquisitions and divestitures.
The rollout of a common ERP platform in Germany disrupted service and reduced quarterly revenues by an estimated $140 million. Soft demand and weaker commercial execution in the United Kingdom and Benelux added to the pressure.
Segment EBITDA fell to $109 million from $151 million, while the EBITDA margin contracted to 7.5% from 9.4%. The company estimated that the German ERP disruption lowered EBITDA by roughly $50 million, while volume pressure in the United Kingdom and Benelux reduced it by about $30 million.
LKQ Specialty Sales Rise but Costs Weigh
Specialty revenues increased to $488 million from $465 million in the second quarter of 2025. Organic growth was 4.5%, supported by higher volumes across marine, recreational vehicle and automotive product lines.
Gross profit rose to $125 million from $118 million, with the margin improving 20 basis points to 25.6%. Tariff refunds and increased volumes more than offset an unfavorable sales mix.
Despite the top-line growth, segment EBITDA declined to $33 million from $39 million. The EBITDA margin fell to 6.7% from 8.5%, reflecting an $8 million increase in credit losses and higher transportation-related expenses.
LKQ Corp Margins Contract as SG&A Climbs
Consolidated gross profit decreased 2.6% to $1.32 billion. Gross margin edged up to 38.8% from 38.6% as improved pricing and product mix in Europe helped offset weaker sales volumes.
Selling, general and administrative expenses rose 3.3% to $990 million and increased to 29% of revenues from 27.3%. North America’s costs included a $10 million legal reserve, while Europe incurred higher transportation expenses and unfavorable currency effects.
Operating income dropped 24.7% to $225 million, with the operating margin shrinking to 6.6% from 8.5%. Adjusted segment EBITDA declined 15.6% to $349 million, and the related margin contracted 160 basis points to 10.2%.
LKQ Cash Flow Improves in the Quarter
LKQ generated operating cash flow of $111 million and free cash flow of $60 million during the second quarter. For the first six months of 2026, operating cash flow totaled $55 million, while free cash flow was negative $36 million.
As of June 30, 2026, the company had $301 million in cash, down from $319 million as of Dec. 31, 2025. It had $4 billion in total debt and available liquidity of $1.93 billion. Its total leverage ratio was 2.8 times EBITDA.
LKQ returned $129 million to shareholders during the quarter, including $52 million used to repurchase 1.9 million shares and $77 million in dividends. On July 28, 2026, the company also declared a quarterly dividend of 30 cents per share.
LKQ Corp Cuts 2026 Outlook
The company now expects 2026 organic parts and services revenues to decline between 1% and 3% compared with the previous estimated range of a 0.5% decline to 1.5% growth.
Adjusted earnings per share are projected between $2.60 and $2.90, down from the prior forecast of $2.90-$3.20. Operating cash flow guidance is projected to be in the range of $825 million to $1.03 billion, down from the earlier estimate of $900 million to $1.10 billion.
Free cash flow is now expected between $625 million and $775 million compared with the previously expected range of $700-$850 million. The revised outlook assumes a more gradual recovery in Germany and continued softness in the United Kingdom and Benelux. The company’s strategic review remains active, with LKQ continuing discussions with multiple parties.
LKQ currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Key Releases From Auto Space
General Motors Company (GM - Free Report) reported second-quarter 2026 adjusted earnings of $3.57 per share, up 41.3% year over year. The figure beat the Zacks Consensus Estimate of $3.13 by 14.06%. Revenues increased 1.9% to $48.03 billion and surpassed the consensus estimate of $46.56 billion by 3.15%. Strong pricing, lower costs and disciplined incentives supported results. General Motors raised its full-year adjusted EBIT guidance to $14-$16 billion from $13.5-$15.5 billion. Adjusted earnings are now projected at $12-$14 per share, up from the prior range of $11.50-$13.50.
Tesla, Inc. (TSLA - Free Report) reported second-quarter 2026 adjusted earnings of 33 cents per share, which declined 17.5% year over year. The figure missed the Zacks Consensus Estimate of 50 cents by 34%. Revenues advanced 25.5% to $28.24 billion and surpassed the consensus estimate of $25.81 billion by 9.41%. Tesla expects 2026 capital expenditures to exceed $25 billion and rise further over the next two to three years.
Genuine Parts Company (GPC - Free Report) reported second-quarter 2026 adjusted earnings of $2.15 per share, beating the Zacks Consensus Estimate of $2.10 by 2.38%. The bottom line increased 2.4% from $2.10 in the year-ago quarter. Revenues rose 6% year over year to $6.54 billion and surpassed the consensus estimate of $6.39 billion by 2.36%. Genuine Parts reaffirmed its 2026 adjusted earnings guidance of $7.50-$8 per share and total sales growth outlook of 3-5.5%. Genuine Parts ended June with $2.3 billion of liquidity, including $559 million in cash.