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LKQ to Report Q1 Earnings: What's in Store for the Stock?

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LKQ Corporation (LKQ - Free Report) is set to report first-quarter 2019 results, before the opening bell on Apr 25.

In the last reported quarter, its earnings missed estimates. The earnings record shows that the company lagged estimates in two of the trailing four quarters, beating the same once and meeting the mark on another occasion. The average negative earnings was 0.9%.

In the past three months, shares of LKQ Corporation have outperformed the industry it belongs to. The stock has rallied 18.9% compared with the industry’s 9.3% recorded increase.

LKQ Corporation Price and EPS Surprise

LKQ Corporation Price and EPS Surprise | LKQ Corporation Quote

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

Factors Influencing the First Quarter

Recurrent consolidations in almost every quarter and of course, in first-quarter 2019 along with the rising Selling, General and Administrative expenses due to rent and utilities plus freight and fuel costs will hurt LKQ Corporation’s bottom line. The uncertainty in Europe’s economic conditions is another headwind, which is likely to adversely impact the company in the first quarter.

The company, which is a supplier of automotive alternative and specialty parts, is expanding its presence through frequent acquisitions. Lately, it acquired all the assets of Elite Electronics, an entity that specializes in numerous automotive diagnostic and repair services. This buyout has allowed LKQ Corporation an entry into the vehicle services market that will converge with its existing parts and distribution business.

Additionally, partnerships among the industry majors are likely to affect the company’s margin during the soon-to-be-reported quarter. Many automakers are forming coalitions with their counterparts in order to reduce costs. These alliances will in turn, pool their insourcing capabilities rather than making them heavily reliant on the auto parts suppliers. However, this might put the suppliers’ growth prospects at risk, thereby hindering LKQ Corporation’s earnings growth in the process.

Earnings Whispers

Our proven model does not conclusively predict that LKQ Corporation is likely to beat on earnings this reporting cycle. 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 +0.67%. 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 #4 (Sell), which lowers the predictive power of ESP. Further, combined with a positive ESP, the stock’s surprise prediction is left inconclusive this earnings season.

We caution against the stocks with a Rank of 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 auto stocks worth considering as these comprise the right mix of elements to deliver an earnings beat this time around:

BorgWarner Inc. (BWA - Free Report) has an Earnings ESP of +3.49% and a Zacks Rank #3. Its first-quarter 2019 results are slated to be released on Apr 25.

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

General Motors Company (GM - Free Report) has an Earnings ESP of +5.61% and is a #3 Ranked player. Its first-quarter 2019 results are slated to be reported on Apr 30.

Cummins Inc. (CMI - Free Report) has an Earnings ESP of +2.02% and a Zacks Rank of 3. Its first-quarter 2019 results are scheduled to be announced on Apr 30.

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