With a market cap of $7.7 billion, LKQ Corporation (LKQ) is a prominent distributor of automotive replacement, recycled, remanufactured, and specialty parts, serving collision and mechanical repair shops as well as individual consumers. Headquartered in Antioch, Tennessee, the company leverages a broad distribution network and diverse product portfolio that includes recycled parts, performance accessories, and its self-service salvage business. Companies valued between $2 billion and $10 billion or more a ...

ANTIOCH, Tenn., Sept. 25, 2025 (GLOBE NEWSWIRE) -- LKQ Corporation (Nasdaq: LKQ) will release its third quarter 2025 financial results on Thursday, October 30, 2025. Conference Call Details LKQ will host a conference call and webcast on October 30, 2025 at 8:00 a.m. Eastern Time (7:00 a.m. Central Time) with members of senior management to discuss the Company's results. To access the investor conference call, please dial (833) 470-1428. International access to the call may be obtained by dialing (404) 975-4 ...

Core Viewpoint - U.S. small-cap stocks are experiencing significant performance gains, outperforming large-cap stocks, with expectations for further growth if the Federal Reserve cuts interest rates [1][2][6]. Small-Cap Stock Performance - The S&P Small Cap 600 Index has increased by 10.7% in the last three months and 4.1% over the past 30 days, while the S&P 500 Index has risen by 8.9% and 1.8% respectively [1]. - Small-cap stocks are more sensitive to economic conditions and interest rate changes, making them a focal point for potential investment opportunities [4][6]. Interest Rate Impact - A projected 0.25% cut in the federal funds rate is anticipated to benefit small-cap companies by lowering borrowing costs, which is crucial as these companies often rely on debt financing [2][3]. - Lower interest rates are expected to enhance earnings power for small-cap firms by reducing interest expenses [3]. Economic Growth and Small-Caps - If lower rates stimulate the economy and growth stabilizes or accelerates, small-cap stocks are likely to outperform as they typically do in the early to mid-stages of economic expansion [4][6]. - However, if rate cuts are a response to economic weakness, small-cap stocks may underperform due to their cyclical nature [6]. Notable Small-Cap Stocks - **Patrick Industries**: Year-to-date performance of 37.00%, expected to benefit from lower rates leading to volume growth and a successful M&A strategy [8]. - **Federal Signal**: Year-to-date performance of 38.00%, poised for growth due to lower borrowing rates for industrial customers and benefits from infrastructure spending [9][10]. - **LKQ Corporation**: Year-to-date performance of -10.42%, positioned to gain from increased demand for vehicle parts as consumers extend the life of their vehicles amid high prices [11][12]. Investment Strategies - The small-cap sector presents opportunities for value addition through mutual funds or active ETFs, especially as information asymmetry increases with smaller companies [13]. - Investors are advised to seek quality managers who focus on well-valued companies and maintain close relationships with company management for better monitoring [14].

Group 1 - The Carillon Scout Mid Cap Fund's second quarter 2025 investor letter indicates that the Russell Midcap Index experienced positive returns despite an initial sell-off in April due to tariff announcements [1] - LKQ Corporation (NASDAQ:LKQ) is highlighted as a key stock, with a one-month return of 7.27% and a 52-week loss of 17.11%, closing at $32.31 per share with a market capitalization of $8.313 billion as of September 09, 2025 [2] - The fund notes that LKQ Corporation's performance has been affected by rising repair costs leading to a decline in demand for its products, compounded by bad weather in Europe and tariff uncertainties [3] Group 2 - LKQ Corporation is not among the top 30 most popular stocks among hedge funds, with 32 hedge fund portfolios holding the stock at the end of the second quarter, down from 33 in the previous quarter [4] - While LKQ Corporation is recognized for its potential, the analysis suggests that certain AI stocks may offer greater upside potential and lower downside risk [4] - Additional insights on LKQ Corporation can be found in other investor letters and analyses from hedge funds [5]

Core Insights - LKQ Corporation has entered into a definitive agreement to sell its Self Service segment, "Pick Your Part," to Pacific Avenue Capital Partners for an enterprise value of $410 million, subject to customary post-closing adjustments [1][2] - The sale is part of LKQ's multi-year transformation strategy aimed at simplifying its corporate structure and focusing on core segments, as stated by the company's President and CEO, Justin Jude [2] - The net proceeds from the sale will be utilized to strengthen LKQ's balance sheet through debt repayment [2] Transaction Details - The transaction is expected to be completed in the fourth quarter of 2025, pending customary closing conditions and regulatory approvals [3] - Jefferies LLC acted as the financial advisor, while Wachtell, Lipton, Rosen & Katz served as the legal advisor for LKQ in this transaction [3] Company Overview - LKQ Corporation is a leading provider of alternative and specialty parts for automobiles and other vehicles, with operations in North America, Europe, and Taiwan [4] - The company offers a wide range of OEM recycled and aftermarket parts, replacement systems, components, equipment, and services for various vehicles [4]

Corporate Governance Changes - LKQ Corporation announced the election of John Mendel as Chairman of the Board, effective immediately, following Guhan Subramanian's decision to step down as Chairman and retire from the Board on January 1, 2026 [1][2] - The transition process is supported by Mr. Subramanian, who will remain on the Board for the remainder of the year to ensure a seamless handover [1] Leadership Experience - John Mendel has been a Board member since August 2018 and has over 45 years of experience in the automotive and wholesale distribution industries, having held executive positions at American Honda, Ford, Lincoln, Mercury, and Mazda America [2][4] - His previous role was Executive Vice President of the Automotive Division at American Honda Motor Company from November 2004 until April 2017 [4] Strategic Focus - Mr. Mendel expressed excitement about his new role and emphasized a focus on simplifying the business portfolio, implementing a leaner operating model, investing in organic growth opportunities, and maintaining a balanced capital allocation policy [3] - The Board aims to work closely with Justin Jude to capture greater market share and enhance shareholder value [3] Acknowledgment of Contributions - Mr. Mendel and Justin Jude both acknowledged Guhan Subramanian's contributions and leadership during his tenure on the Board, highlighting the importance of fresh perspectives and diverse expertise for the company's sustained growth [3]

Group 1 - The previous investment stance on LKQ Corporation (NASDAQ: LKQ) was a hold rating due to lack of confidence in its ability to meet guidance [1] - The 2Q25 results indicated a deterioration in LKQ's fundamentals, confirming the previous assessment [1] - The investment strategy focuses on long-term investments while also considering short-term opportunities to identify alpha [1] Group 2 - The investment approach is based on bottom-up analysis, emphasizing the fundamental strengths and weaknesses of individual companies [1] - The investment horizon is medium to long-term, aiming to find companies with solid fundamentals and growth potential [1]

Core Insights - LKQ reported a decline in adjusted earnings per share and revenue for Q2 2025, with adjusted diluted EPS at $0.87, missing the consensus estimate of $0.92, and revenue at $3.64 billion, down 1.9% year-over-year [1][2] - Management described the quarter as challenging due to persistent demand softness and shrinking margins, leading to a downward revision of full-year 2025 earnings and revenue guidance [1][10] Financial Performance - Adjusted EPS decreased by 11.2% from $0.98 in Q2 2024 to $0.87 in Q2 2025 [2] - Revenue fell from $3.71 billion in Q2 2024 to $3.64 billion in Q2 2025, a decline of 1.9% [2] - Net income increased by 3.8% year-over-year to $192 million [2] - Free cash flow surged by 82.7% to $243 million compared to $133 million in Q2 2024 [2] - Segment EBITDA declined by 11.2% to $430 million from $484 million in Q2 2024 [2] Business Overview and Strategy - LKQ specializes in alternative and specialty automotive parts, including recycled, aftermarket, and remanufactured parts, operating across North America and Europe [3] - The company is focusing on capturing market share, driving operational efficiency, simplifying its business portfolio, and strengthening its balance sheet [4] Market Conditions and Operational Developments - Organic parts and services revenue declined by 3.4% in Q2 2025, attributed to a reduced number of repairable insurance claims in North America, which were down 9% [5] - Sales in Europe fell by 1.9% year-over-year, with organic revenue declining by 4.9% [5] - Segment EBITDA margins contracted across most segments, with North America at 15.8%, Europe at 9.4%, and Specialty at 8.5% [6] Cost Management and Shareholder Returns - Selling, general, and administrative expenses rose by 2.3%, now representing 27.4% of sales [6] - The company has implemented cost reduction actions totaling over $125 million in the past 12 months, with an additional $75 million targeted for 2025 [6] - Shareholder returns included $39 million in share repurchases and $78 million in dividends during Q2 2025 [7] Future Outlook - Management revised FY2025 guidance downward, projecting organic revenue growth in parts and services to be between -3.5% and -1.5% [10] - New GAAP diluted EPS guidance is set at $2.47–$2.77, down from $2.91–$3.21 [10] - Expected free cash flow for FY2025 is now projected to be between $600 million and $750 million [10]

[PART I FINANCIAL INFORMATION](index=4&type=section&id=PART%20I%20FINANCIAL%20INFORMATION) [Item 1. Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) Unaudited Q2 and H1 2025 financial statements show slight revenue and operating income declines, but increased net income and EPS, driven by lower expenses, alongside growing assets, liabilities, and decreased operating cash flow [Unaudited Condensed Consolidated Statements of Income](index=4&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Income) Q2 2025 revenue slightly decreased to $3.64 billion, but net income and diluted EPS rose due to lower restructuring costs and income tax provisions, a trend consistent for the six-month period Consolidated Income Statement Highlights (in millions, except EPS) | Metric | Q2 2025 | Q2 2024 | YoY Change | H1 2025 | H1 2024 | YoY Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | **Revenue** | $3,642 | $3,711 | -1.9% | $7,105 | $7,414 | -4.2% | | **Gross Margin** | $1,412 | $1,441 | -2.0% | $2,789 | $2,893 | -3.6% | | **Operating Income** | $312 | $329 | -5.2% | $599 | $618 | -3.1% | | **Net Income (to LKQ)** | $192 | $185 | +3.8% | $361 | $343 | +5.2% | | **Diluted EPS** | $0.75 | $0.70 | +7.1% | $1.40 | $1.29 | +8.5% | [Unaudited Condensed Consolidated Balance Sheets](index=6&type=section&id=Unaudited%20Condensed%20Consolidated%20Balance%20Sheets) As of June 30, 2025, total assets increased to $15.94 billion, driven by receivables, inventories, and goodwill, with total liabilities and stockholders' equity also rising Consolidated Balance Sheet Highlights (in millions) | Account | June 30, 2025 | Dec 31, 2024 | | :--- | :--- | :--- | | Cash and cash equivalents | $289 | $234 | | Receivables, net | $1,442 | $1,122 | | Inventories | $3,394 | $3,220 | | Goodwill | $5,756 | $5,448 | | **Total Assets** | **$15,944** | **$14,955** | | Accounts payable | $1,891 | $1,801 | | Long-term obligations | $4,395 | $4,127 | | **Total Liabilities** | **$9,401** | **$8,923** | | **Total Stockholders' Equity** | **$6,543** | **$6,032** | [Unaudited Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) H1 2025 operating cash flow significantly decreased to $293 million due to unfavorable changes in accounts payable, while investing and financing cash outflows also reduced Cash Flow Summary for Six Months Ended June 30 (in millions) | Cash Flow Activity | 2025 | 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $293 | $466 | | Net cash used in investing activities | ($99) | ($178) | | Net cash used in financing activities | ($169) | ($276) | - The decrease in operating cash flow was primarily driven by a **$245 million negative swing in accounts payable** compared to the prior year period[17](index=17&type=chunk)[131](index=131&type=chunk) [Notes to Unaudited Condensed Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) Detailed notes cover revenue declines across segments, ongoing global restructuring efforts with reduced expenses, and an increase in total debt during the first half of 2025 Revenue by Reportable Segment (in millions) | Segment | Q2 2025 | Q2 2024 | H1 2025 | H1 2024 | | :--- | :--- | :--- | :--- | :--- | | Wholesale - North America | $1,362 | $1,398 | $2,698 | $2,820 | | Europe | $1,601 | $1,633 | $3,116 | $3,270 | | Specialty | $464 | $466 | $857 | $888 | | Self Service | $50 | $55 | $101 | $109 | - The company initiated a '2024 Global Restructuring Plan' to enhance profitability by exiting non-strategic businesses and reducing costs, with total estimated costs of **$130-$140 million**, expected to be substantially complete by the end of 2025[41](index=41&type=chunk) - Total long-term obligations increased to **$4.46 billion** at June 30, 2025, from **$4.20 billion** at December 31, 2024, primarily due to higher borrowings on revolving credit facilities[51](index=51&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=23&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management attributes H1 2025 revenue decline to organic decreases in Europe and North America, while maintaining strong liquidity and effective debt management despite segment EBITDA compression [Results of Operations—Consolidated](index=25&type=section&id=Results%20of%20Operations%E2%80%94Consolidated) H1 2025 consolidated revenue fell 4.2% due to organic declines, but operating income remained stable due to reduced restructuring expenses, and a lower effective tax rate boosted net income - The decrease in H1 2025 parts and services revenue of **$315 million** was driven by a **$273 million (3.9%) organic decline** and a **$66 million (0.9%) decrease from net divestitures**, partially offset by a **$26 million (0.4%) positive foreign exchange impact**[97](index=97&type=chunk) - Restructuring and transaction related expenses decreased by **$60 million** in H1 2025 compared to H1 2024, primarily due to lower costs associated with the 2024 Global Restructuring plan and Acquisition Integration plans[100](index=100&type=chunk) - The effective tax rate for H1 2025 was **27.0%**, down from **30.8%** in H1 2024, mainly due to the nonrecurring unfavorable tax effects of restructuring impairments in the prior year[101](index=101&type=chunk) [Results of Operations—Segment Reporting](index=28&type=section&id=Results%20of%20Operations%E2%80%94Segment%20Reporting) Q2 2025 Segment EBITDA declined for Wholesale - North America, Europe, and Specialty due to lower volumes, competition, and operational challenges, while Self Service remained flat Segment EBITDA (in millions) and Margin | Segment | Q2 2025 EBITDA | Q2 2025 Margin | Q2 2024 EBITDA | Q2 2024 Margin | | :--- | :--- | :--- | :--- | :--- | | Wholesale - North America | $227 | 15.8% | $256 | 17.3% | | Europe | $151 | 9.4% | $174 | 10.6% | | Specialty | $39 | 8.5% | $41 | 8.9% | | Self Service | $13 | 10.0% | $13 | 9.9% | - Wholesale - North America revenue declined due to lower volumes in the paint, body and equipment business from increased competition and fewer repairable claims[105](index=105&type=chunk) - Europe's organic revenue fell **4.9%** in Q2 2025 due to difficult economic conditions, heightened competition, and temporary operational challenges[108](index=108&type=chunk) [Liquidity and Capital Resources](index=34&type=section&id=Liquidity%20and%20Capital%20Resources) The company maintained $1.425 billion in liquidity as of June 30, 2025, continued capital returns through dividends and share repurchases, and remained compliant with all debt covenants Total Liquidity (in millions) | Component | June 30, 2025 | Dec 31, 2024 | | :--- | :--- | :--- | | Availability under credit revolving facilities | $1,136 | $1,222 | | Cash and cash equivalents | $289 | $234 | | **Total liquidity** | **$1,425** | **$1,456** | - The Board of Directors declared a quarterly cash dividend of **$0.30 per share** in both February and April 2025, and another for July 2025[120](index=120&type=chunk) Debt Covenant Compliance as of June 30, 2025 | Covenant | Required Level | Actual Ratio | | :--- | :--- | :--- | | Maximum total leverage ratio | 4.00 : 1.00 | 2.6 | | Minimum interest coverage ratio | 3.00 : 1.00 | 7.3 | [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=37&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) No material changes to market risks, including foreign exchange, interest rates, commodity prices, and inflation, have occurred since the 2024 Form 10-K disclosures - There have been no material changes to the company's market risks arising from foreign exchange rates, interest rates, commodity prices, and inflation since the 2024 Form 10-K filing[139](index=139&type=chunk) [Item 4. Controls and Procedures](index=37&type=section&id=Item%204.%20Controls%20and%20Procedures) Disclosure controls and procedures were effective as of June 30, 2025, with no material changes in internal control over financial reporting during the quarter - Management concluded that the company's disclosure controls and procedures were effective as of the end of the period covered by the report[140](index=140&type=chunk) - No changes occurred in the company's internal control over financial reporting during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, these controls[141](index=141&type=chunk) [PART II OTHER INFORMATION](index=38&type=section&id=PART%20II%20OTHER%20INFORMATION) [Item 1. Legal Proceedings](index=38&type=section&id=Item%201.%20Legal%20Proceedings) Management anticipates no material adverse effect on the company's financial position, results of operations, or cash flows from currently outstanding legal claims - In the opinion of management, currently outstanding claims and lawsuits will not, individually or in the aggregate, have a material adverse effect on the company's financials[143](index=143&type=chunk) [Item 1A. Risk Factors](index=38&type=section&id=Item%201A.%20Risk%20Factors) No new significant risk factors are reported, with investors referred to previous disclosures in the 2024 Form 10-K and Q1 2025 Form 10-Q - The company refers to its 2024 Form 10-K and Q1 2025 Form 10-Q for information concerning risks and uncertainties, indicating no material updates in this report[144](index=144&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=38&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company repurchased 1.0 million shares of common stock for approximately $41 million during Q2 2025 under its authorized stock repurchase program Stock Repurchases for Q2 2025 | Period | Total Shares Purchased (millions) | Average Price Paid per Share | | :--- | :--- | :--- | | April 2025 | 0.3 | $39.99 | | May 2025 | 0.3 | $40.60 | | June 2025 | 0.4 | $38.38 | | **Total** | **1.0** | **-** | - The company's stock repurchase program authorization extends through October 25, 2026[145](index=145&type=chunk) [Other Items (3, 4, 5, 6)](index=38&type=section&id=Other%20Items%20(3%2C%204%2C%205%2C%206)) This section confirms no defaults on senior securities or mine safety disclosures, no Rule 10b5-1 trading plan changes by officers, and provides a list of filed exhibits - Items 3 (Defaults Upon Senior Securities) and 4 (Mine Safety Disclosures) were not applicable[147](index=147&type=chunk)[148](index=148&type=chunk) - During the quarter, no directors or executive officers adopted, modified, or terminated any Rule 10b5-1 trading arrangement[149](index=149&type=chunk)

Core Insights - LKQ Corporation reported adjusted earnings of 87 cents per share for Q2 2025, missing the Zacks Consensus Estimate of 93 cents and declining from 98 cents in the same period last year [2] - Quarterly revenues reached $3.64 billion, exceeding the Zacks Consensus Estimate of $3.61 billion but down from $3.71 billion year-over-year [2] Segment Highlights - Wholesale North American segment revenues were $1,442 million, down 2.2% year-over-year but above the estimate of $1,438 million; EBITDA was $227 million, below the forecast of $244.6 million and down from $256 million in Q2 2024 [3] - European segment revenues totaled $1.61 billion, a 2% decline year-over-year but above the estimate of $1.59 billion; EBITDA was $151 million, down from $174 million year-over-year and missing the forecast of $167.9 million [4] - Specialty segment revenues were $465 million, flat year-over-year and above the projection of $437.7 million; EBITDA was $39 million, slightly down from $41 million year-over-year but exceeding the forecast of $32.3 million [5] - Self-Service segment revenues totaled $129 million, down from $133 million in Q2 2024 and missing the estimate of $135.3 million; EBITDA was $13 million, flat year-over-year but below the estimate of $15.2 million [6] Financial Position & Dividend - As of June 30, 2025, LKQ had cash and cash equivalents of $289 million, up from $234 million at the end of 2024; total debt was $4.5 billion [7] - In Q2 2025, cash flow from operating activities was $296 million and free cash flow was $243 million [7] - The company repurchased 1 million shares worth $39 million in Q2 2025, totaling approximately 65.5 million shares repurchased for $2.9 billion since the buyback program began [8] - A quarterly cash dividend of 30 cents per share was announced, payable on August 28, 2025 [8] Revised 2025 Guidance - LKQ revised its 2025 outlook, now expecting parts and services organic revenues to decline by 1.5-3.5%, down from previous growth estimates of 0-2% [9] - Adjusted EPS guidance was lowered to a range of $3-$3.30, down from $3.40-$3.70, compared to $3.48 in 2024 [9] - Operating cash flow guidance was revised to $875 million to $1.075 billion, down from $1.075-$1.275 billion; free cash flow guidance was adjusted to $600-$750 million from $750-$900 million [10]