LKQ Corporation

LKQ Corporation delivered a significantly below part result in the year’s final quarter. Revenue declined in the quarter as compared to the last year, driven by the divestiture of PGW and FX translation. Organic revenue of parts and services increased but the overall top-line was below analyst expectations. Other revenue fell due to weaker commodity prices. There was decent organic revenue growth and margins in the company’s North American wholesale segment but despite this, the company failed to meet the earnings expectations of Wall Street. The trend in parts per repair was encouraging, which reached an all-time high in the year. The ongoing improvement in the company’s fill rates and the upward trend in its aftermarket sales volumes reached their highest percentage levels. State Farm announced they would roll out their expanded non-OEM collision repair parts for most of the U.S. The salvage inventory is healthy and there was some relief in the company’s cost per vehicle in the quarter. The company’s salvage business had a decent organic growth. Another key update was its acquisition of Uni-Select, a major player in the distribution of automotive refinish and industrial coatings and related products in North America and UK. We give LKQ Corporation a ‘Hold’ rating with a revised target price.