Invite ye felawes and frendes desirous in gold to enter the gates of Shrewd'm, for they will thanke ye later.
- Manlobbi
Halls of Shrewd'm / US Policy❤
No. of Recommendations: 2
LKQ hit an alert I set more than a year ago at $42/share. Company missed its earnings target but just about hit its revenue target. Is anyone still following? Seems like a short term reaction.
No. of Recommendations: 4
Doing a little research. Doesn't seem bad to me.
Revenue of $3.7 billion (an 11% increase compared to the same period in 2023)
Diluted EPS2 of $0.59; adjusted diluted EPS1,2 of $0.82
Operating cash flow of $253 million; free cash flow1 of $187 million
Dividend of $0.30 per share approved to be paid in the second quarter of 2024
Completed an offering of €750 million of unsecured 4.125% senior notes
Uni-Select synergies accelerated and increased from $55 million to $65 million
Repurchased $30 million of LKQ shares
No. of Recommendations: 1
Sounds like they attributed light revenue to warm weather --> fewer accidents, and European operations hampered by union strikes --> double digit salary increases...
No. of Recommendations: 6
LKQ hit an alert I set more than a year ago at $42/share...
Down in the dumps again, currently at $40.60. I think it hit a fresh 52 week low yesterday.
Does anyone have any further thoughts?
For a random stab at what "the street" thinks, Value Line thinks they'll be making about $5.35/share in 3-5 years, and trading at a multiple of 16. Adding a range of uncertainty, they are targeting a price around $70-105 in that time frame, which would imply a very healthy rate of return if those guesses ended up vaguely correct. (a very big if)
Jim
No. of Recommendations: 12
Does anyone have any further thoughts?
I don't know anything about LKQ. I'm just checking the accounting to see what's going on.
Their revenue has been rising over the last quarters at their typically healthy rate, though cost of goods sold has also been rising so it is a wash.
Not bad, but for the last 4 quarters their EPS has been caving in, so I presume that is where the price action has come from. Investors like to treat the temporary as permanent (though sometimes, more rarely, it really is permanent).
The per-share earnings the last 4 quarters:
$1.05, $0.78, $0.65, $0.59
Where's the problem? Shares outstanding unchanged, gross profit unchanged.
The line that has been changing is their operating expenses - not by much, but it gas been creeping and and responsible for taking their earnings down. There is no single one-off quarter that is the culprit but a gradual creeping down (which is usually more ominous).
Anyway margins are around to where they were in 2015 - not bad. There were just temporarily really high in 2022, so again investors were probably assuming that is permanent when it wasn't. So much of the price fall could just be investors working that fact out. They have a ~75% total return over the last 5 years so it is not as the price has really underperformed their rising value. Sales per share grew only 40% over that period.
- Manlobbi
No. of Recommendations: 2
because lkq has often been on the value radar, i always imagine them as copart w/out the owner&operator view of the company inseparable from their identity.
No. of Recommendations: 5
LKQ at $46.15.
It has started to behave better than the broad market rather than worse, so on a relative basis versus the average large US firm the price seems (?) to have bottomed out about a month ago. That's sometimes the moment to look at falling cutlery: after the first bounce off the floor.
But the valuation still seems quite reasonable, if you believe the basic business has a future. For whatever it's worth, current price is about 10.5 times consensus earnings for next year. Figures over 20 were the norm in the years before the pandemic.
Jim
No position
