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LKQ Corporation's (LKQ) Q3 Earnings: What is in Store?

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LKQ Corporation (LKQ - Free Report) is set to report third-quarter 2018 results before the opening bell on Oct 25.

In the last reported quarter, the company delivered an earnings surprise of 5.2%. Per the earnings record, it missed estimates in two of the trailing four quarters, while beating earnings on the other two occasions. The average earnings surprise was 0.8%.

In the past six months, shares of LKQ Corporation have underperformed the industry it belongs to. The stock has plunged 27.6% compared with 2.7% decline recorded by the industry.

Let’s see, how things have shaped up for the upcoming announcement.

LKQ Corporation Price and EPS Surprise

LKQ Corporation Price and EPS Surprise | LKQ Corporation Quote

Factors Influencing This Quarter

LKQ Corporation focuses on improving its footprint through organic expansion and acquisitions. For 2018, the company expects organic revenue growth of 4.5-5.5% for parts & services compared with 4-5.5% stated earlier. Adjusted earnings per share from continuing operations in 2018 are expected to be between $2.25 and $2.33, up from $2.2-$2.3 stated earlier.

In the first half of 2018, SG&A rose 21.9% year over year to $1.59 billion. Further, the company expects capital expenses of $255-$285 million in 2018, up from $235-$265 million stated earlier. This high expenditure might be due to fluctuating price of fuel, scrap metal and other commodities as well as product recall.

The Zacks Consensus Estimate for third-quarter 2018 revenues for the Parts and Services segment is $2.95 billion. In second-quarter 2018, revenues from the Parts and Services segment were $2.88 billion.

Earnings Whispers

Our proven model does not conclusively show that LKQ Corporation is likely to beat on earnings this quarter. This is because, a stock needs to have a positive Earnings ESP and a favorable Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. But that is not the case here as you will see below.

Earnings ESP: LKQ Corporation has an Earnings ESP of -0.53%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: LKQ Corporation currently carries a Zacks Rank of 3, which increases the predictive power of ESP. However, this, combined with its Earnings ESP, makes a surprise prediction difficult.

Note that we caution against stocks with a Rank #4 or 5 (Sell-rated) going into the earnings announcement, especially when the company is witnessing negative estimate revisions.

Stocks to Consider

Here are a few auto stocks worth considering, comprising the right combination of elements to deliver an earnings beat this time around:

Cummins Inc. (CMI - Free Report) has an Earnings ESP of +1.46% and a Zacks Rank of 3. The company will report third-quarter 2018 financial figures on Oct 30.

You can see the complete list of today’s Zacks #1 Rank stocks here.

Fox Factory Holding Corp. (FOXF - Free Report) has an Earnings ESP of +2.77% and a Zacks Rank #3. The company’s third-quarter 2018 financial results are expected to be released on Nov 7.

Meritor, Inc. (MTOR - Free Report) has an Earnings ESP of +2.36% and is a Zacks #3 Ranked player. The company’s third-quarter 2018 financial numbers are expected to be announced on Nov 14.

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