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What's in Store for LKQ Corporation (LKQ) in Q4 Earnings?

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LKQ Corporation (LKQ - Free Report) is set to report fourth-quarter and 2018 results before the opening bell on Feb 28.

In the last reported quarter, the company’s earnings were in line with estimates. Per the earnings record, it missed estimates in two of the trailing four quarters while beating earnings estimates once and meeting in another. The average earnings surprise was 1.00%.

Year to date, shares of LKQ Corporation have gained 16.1% compared with 11.4% increase recorded by the S&P index.

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

Factors Influencing This Quarter

For 2018, LKQ Corporation has reduced expectation of organic revenue growth by 0.5% and currently expects it to be 4.5-5%. The guidance reflects that the company expects lowered global organic revenue growth from parts and services in the fourth quarter. Further, volatility in foreign currencies, high metal costs and business seasonality impelled it to reduce adjusted earnings per share outlook by $0.04. The current expectation is $2.19-$2.22 per share.

This specialty auto parts provider is achieving robust growth in the European segment, majorly driven by the acquisition of STAHLGRUBER in 2018. However, the company expects levels to decline in the fourth quarter from robust levels witnessed in the first half of 2018. Further, it plans to increase inventory levels in the U.K. in the fourth quarter to protect the business from any supply-chain disruptions in case of a no-deal Brexit.

Despite cost pressures, LKQ Corporation expects growth to continue in North America, majorly in the key markets consisting New York, California, Pennsylvania, Florida and Michigan. Growth will be driven by improved pricing and continued developments of telematics and road map platforms.

Earnings Whispers

Our proven model does not conclusively predict 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 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 -2.04%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: The company currently carries a Zacks Rank of 4 (Sell), 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 (Strong Sell) going into the earnings announcement, especially when the company is witnessing negative estimate revisions.

Stocks to Consider

Here are a few stocks with the right combination of elements to outpace earnings estimates this time around:

Westport Fuel Systems Inc. (WPRT - Free Report) has an Earnings ESP of +50.00% and it currently carries a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

AMC Networks Inc. (AMCX - Free Report) has an Earnings ESP of +2.21% and it currently carries a Zacks Rank #3.

Comcast Corporation (CMCSA - Free Report) has an Earnings ESP of +7.94% and it currently has a Zacks Rank of 3.

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