LKQ Corporation ( LKQ Quick Quote LKQ - Free Report) recently provided updates for second-quarter 2020 and on the momentum witnessed in its operations through May, as states continue to ease the shelter-in-place strategies and begin reopening processes, which were imposed due to the coronavirus outbreak.
Parts and services organic revenues in the second quarter (through May) have declined roughly 25%, year on year, the April and May monthly revenues being down 30% and 20%, respectively. The company noted that revenues are tracking ahead of its initial projections and it expects to finish the quarter on a strong note. It has witnessed weekly sequential revenue improvement across its segments since mid-April.
Furthermore, the company has also amended its credit agreement with lending partners to enhance the flexibility of the net leverage covenant and provide additional financial strength.
In addition, LKQ has initiated a series of cost-savings initiatives throughout the enterprise, including substantial staffing adjustments, to help mitigate the business disruption, and position LKQ for earnings growth when the U.S. and European economies rebound.
These actions, which were announced with the first-quarter 2020 results, have contributed to preliminary results for April and May, resulting in operating profit for both months. Cash management practices were successful as the company generated positive free cash flow in April and May, which was used to pay off more than $250 million in debt and build cash balances during the two-month cycle. The focus on cost discipline is likely to result into potential annualized run-rate savings of more than $1 billion.
As of Mar 31, 2020, the company had $3.5 billion and $1.9 billion in net debt and total liquidity, respectively. Further, the company’s balance sheet showcased net debt of $3.1 billion and total liquidity of $2.2 billion, as of May 31, 2020.
Notably, in March, LKQ withdrew the 2020 guidance and suspended its existing share-repurchase program to focus on preserving capital in response to the uncertainty caused by the pandemic.
Zacks Rank & Stocks to Consider
LKQ currently carries a Zacks Rank #3 (Hold). Shares of the company have depreciated 21.8%, year to date, compared with the
industry’s decline of 21.7%.
Some better-ranked stocks in the same sector are Tesla, Inc. (
TSLA Quick Quote TSLA - Free Report) , Halfords Group Plc ( HLFDY Quick Quote HLFDY - Free Report) and Niu Technologies ( NIU Quick Quote NIU - Free Report) , each carrying a Zack Rank of 2 (Buy) at present. You can see . the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here
Shares of Tesla have soared 134.8%, year to date, compared with its industry’s rise of 39.5%.
Shares of Halfords have gained 5.8%, year to date, as against its industry’s decline of 13.1%.
Shares of Niu have gained 48.3%, year to date, as against its industry’s decline of 13.2%.
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