Group 1: Hormel Foods Corp. - Hormel Foods Corp. is known for its products like ham and bacon, but it owns around 40 brands and sells in approximately 80 countries [4] - The stock experienced a 17% decline in the third quarter due to rising costs for pork and beef, which are impacting profit margins [4] - At a recent price of about $25, the stock trades at 1.1 times revenue and 2.7 times book value, which are considered attractive multiples [4][5] - Despite Wall Street's lack of enthusiasm, with only two out of twelve analysts rating it a "buy," the company has a strong historical record, having never posted a loss since going public in 1928 [5] Group 2: Amdocs Ltd. - Amdocs Ltd. provides software and services primarily to communications and entertainment companies, with a significant historical reliance on AT&T as a customer [6] - The stock fell over 9% in the latest quarter, but six out of seven analysts covering it recommend buying [6] - Revenue decreased by about 3% over the past year due to shedding low-margin businesses, while earnings increased [7] Group 3: Eastman Chemical Co. - Eastman Chemical Co. shares fell 17% in the recent quarter, attributed to signs of a slowing economy [10] - Insider purchases were noted, with the CEO and CFO increasing their stakes, indicating confidence in the company's long-term prospects [9] Group 4: LKQ Corp. - LKQ Corp. recycles auto parts and operates around 1,500 high-tech junkyards in the U.S. and Europe [11] - The stock declined nearly 17% in the past quarter, with sales and earnings missing expectations, particularly in European operations [12] - The expectation is that rising car prices in the U.S. due to tariffs may lead consumers to keep their cars longer, benefiting the recycled-parts business [11] Group 5: Ingredion Inc. - Ingredion Inc. produces ingredients for foods and beverages, with a focus on sweeteners [13] - Despite a revenue dip in the past year, earnings remained strong, yet the stock fell 9% last quarter [13] - The company has achieved a return on stockholders' equity of 15% in 11 of the past 15 years, and the stock is considered cheap at 12 times earnings [13]

Core Points - LKQ Corporation has completed the sale of its Self Service segment, "Pick Your Part," to an affiliate of Pacific Avenue Capital Partners for an enterprise value of $410 million, subject to customary purchase price adjustments [1][2] - The CEO of LKQ stated that the sale aligns with the company's strategic priorities to simplify its business portfolio and reduce costs while aiming to expand margins as market conditions improve [2] - Proceeds from the transaction will be utilized to strengthen LKQ's balance sheet through debt repayment, supporting the company's disciplined capital allocation strategy [2] - Following the sale, LKQ will report the Self Service segment as discontinued operations in its consolidated financial statements starting with the third quarter 2025 earnings release scheduled for October 30, 2025 [2] Company Overview - LKQ Corporation is a leading provider of alternative and specialty parts for the repair and accessorization of 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 types of vehicles [4] Advisory Information - Jefferies LLC acted as the financial advisor and Wachtell, Lipton, Rosen & Katz served as the legal advisor to LKQ in connection with the transaction [3]

Core Insights - LKQ Corporation has a market cap of $7.7 billion and is a leading distributor of automotive replacement, recycled, remanufactured, and specialty parts, serving various customers including repair shops and individual consumers [1][2] Company Overview - LKQ is classified as a "mid-cap" stock, with its market leadership attributed to a robust global distribution and logistics network that ensures high parts availability and quick delivery [2] - The company's diverse product portfolio includes aftermarket, recycled, remanufactured, and specialty parts [2] Stock Performance - LKQ shares have decreased by 33.1% from their 52-week high of $44.82 and have fallen 18.8% over the past three months, underperforming the Nasdaq Composite, which rose by 12.1% in the same period [3] - Year-to-date, LKQ stock is down 18.4%, lagging behind the Nasdaq Composite's 15.9% increase [4] - Over the past 52 weeks, LKQ shares have declined by 23.3%, while the Nasdaq Composite has seen a slight increase of 23.8% [4] Recent Financial Performance - On July 24, LKQ announced Q2 2025 earnings, revealing a 17.8% drop in shares following a lowered 2025 guidance due to weaker repairable claims in North America and challenging conditions in Europe [5] - The company expects adjusted EPS to be between $3.00 and $3.30, with a projected decline of 1.5% to 3.5% in organic parts and services revenue [5] - LKQ reported revenue of $3.6 billion, a decrease of 1.9% year-over-year, with organic parts and services revenue falling by 3.4% [5] - Adjusted EPS also fell by 11.2% to $0.87 [5] Competitive Landscape - In comparison, rival AutoZone, Inc. has performed better, with a year-to-date stock gain of 29.2% and a 33% return over the past 52 weeks [6]

Core Viewpoint - LKQ Corporation is set to release its third quarter 2025 financial results on October 30, 2025, and will host a conference call to discuss these results with senior management [1]. Group 1: Financial Results Announcement - LKQ Corporation will announce its third quarter 2025 financial results on October 30, 2025 [1]. - The conference call to discuss the results will take place at 8:00 a.m. Eastern Time [2]. - The call can be accessed by dialing (833) 470-1428 for domestic calls and (404) 975-4839 for international calls, with a conference ID of 810538 required [2]. Group 2: Webcast and Replay Information - An audio webcast and accompanying slide presentation will be available on LKQ's Investor Relations section of their website [3]. - A replay of the conference call will be accessible by telephone and online, with the telephone replay requiring conference ID 158780 [4]. - Both replay formats will be available until November 6, 2025 [4]. Group 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 [5]. - The company offers a wide range of OE recycled and aftermarket parts, replacement systems, components, equipment, and services for various types of vehicles [5].

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]