LKQ Corporation
LKQ
$19.47
-1.22%
LKQ Corporation is a global distributor of vehicle products — alternative and aftermarket replacement parts, components, and specialty accessories used in collision repair, mechanical maintenance, and vehicle personalization — operating through three segments (North America, Europe, and Specialty), with Europe contributing the largest share of revenue. The company is best characterized as a scale-driven, consolidating distributor: its competitive moat rests on an unmatched salvage and aftermarket sourcing network, deep inventory breadth, and a fragmented-supplier roll-up model that has made it the dominant global player in alternative collision parts rather than a technology disruptor. The current investor narrative has turned sharply negative: a Q3 2026 earnings miss (revenue of $3.319B, down 5.1% YoY, and an EPS loss of $0.10) triggered a violent single-day repricing on October 23, 2026, and the debate now centers on whether this is a cyclical air-pocket in European and North American collision volumes or evidence of structural margin erosion and share loss. Activist-style institutional accumulation (Ananym Capital and Kiltearn adding to positions during prior pullbacks) sits in tension with sell-side downgrades and a Zacks 'Strong Sell' flag, framing LKQ as a contested deep-value turnaround rather than a growth story.…
LKQ
LKQ Corporation
$19.47
Related headlines
Investment Opinion: Should I buy LKQ Today?
Rating: Hold, with a speculative value-tilt. The thesis is that LKQ is a self-funding, cash-generative distributor trading at a trough valuation (8.50x EV/EBITDA, 0.56x sales, 1.18x book, ~12.1% FCF yield on $610M TTM FCF against a $5.03B market cap) whose Q3 2026 collapse to a 1.60% operating margin and -$0.10 EPS is more likely a cyclical air-pocket than a permanent reset — but the reported numbers do not yet confirm that. The institutional tape is genuinely split: JP Morgan maintained Overweight on October 30, Barclays upgraded to Overweight on October 26, and Baird maintained Outperform, while Roth Capital cut to Neutral and Barrington Research cut to Market Perform on the earnings gap; with only one formal price target in the dataset, a consensus target and implied upside are Data not available, so the rating must be anchored on valuation and cash flow rather than sell-side upside.
Supporting evidence is strong on price and cash, weak on momentum. Valuation sits at the absolute bottom of LKQ's own multi-year band — PS has fallen from 4.77x in Q4 2022 and 3.65x in Q4 2023 to 0.56x today, P/B is 1.18x versus 2.6x in 2022–2023, and the 4.01% dividend yield is roughly five times its 2022–2024 level of ~0.8% — while EV/EBITDA of 8.50x and P/CF of 7.27x screen at a rough 30–50% discount to the low-to-mid-teens EV/EBITDA and 1.5–3.0x sales typical of healthier auto-parts distributors. Cash generation is real: Q3 operating cash flow of $411M funded $39M capex, $76M dividends, $226M debt repayment, and $30M buybacks, and debt-to-equity of 0.774 with a current ratio of 1.67 rules out solvency stress. Against that, revenue has fallen YoY for three straight quarters (-5.14% in Q3 to $3.319B, -6.4% in Q2 to $3.408B, roughly flat in Q1 at $3.469B), Q3 net income was -$26M versus +$180M a year earlier, and the stock has lagged SPY by 42.80 points over one year with a -50.86% max drawdown — the consensus $2.83 EPS recovery is a forecast, not a fact.
The conditions that would change the rating are specific. An upgrade to Buy requires either (a) Q4 2026 operating margin recovering toward the 6%+ level seen in Q1 ($217M, 6.26%) and Q2 ($225M, 6.60%) rather than the 1.60% Q3 trough, or (b) a decisive reclaim of the $22.47 pre-gap close that repairs the broken chart, ideally with European revenue stabilizing from the $1.453B base. A downgrade to Sell would follow a break below the $17.10 October 27 low, which would signal the 1.60% margin is a new structural base and put the consensus $2.83 EPS at risk of sharp cuts. On balance the stock is undervalued relative to its own history and to peers on cash-flow metrics, but fairly-to-appropriately priced relative to the currently reported earnings power — a deep-value situation where the discount is large enough to compensate for the risk, but not yet large enough to justify aggressive accumulation before margin evidence arrives. This is an objective, data-driven assessment, not personalized financial advice.
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LKQ 12-Month Price Forecast
LKQ is a contested deep-value turnaround where the cash-flow math (8.50x EV/EBITDA, 0.56x sales, ~12.1% FCF yield, 4.01% dividend yield) is compelling but the reported operating trend is still deteriorating, which is why the stance is neutral rather than bullish despite the 17.3% bounce off the $17.10 low to $20.05. The 25/50/25 bull/base/bear weighting reflects that the consensus $2.83 EPS recovery is a forecast with a tight $2.76–$2.91 range, not yet visible in results, while the absence of a published consensus price target makes price discovery inefficient and headline-driven. An upgrade to bullish would require Q4 2026 operating margin recovering toward the 6%+ levels of Q1 ($217M, 6.26%) and Q2 ($225M, 6.60%), or a decisive reclaim of the $22.47 pre-gap close; a downgrade to bearish would follow a break below $17.10 or a second consecutive quarterly loss. The single variable that resolves the debate is whether 1.60% operating margin was a cyclical air-pocket or a structural reset — everything else in the thesis follows from that.
Wall Street consensus
Coverage is thin in the provided dataset — only 1 analyst with a formal target — but the institutional ratings history is more informative: of the ten most recent actions, the distribution skews positive (JP Morgan Overweight maintained October 30, Barclays upgraded to Overweight from Equal Weight on October 26, Baird Outperform maintained) against two notable negatives (Roth Capital cut to Neutral from Buy on October 26, and Barrington Research cut to Market Perform from Outperform on October 23, the day of the earnings gap). The lone consensus EPS estimate of $2.83 (range $2.76–$2.91) and revenue estimate of $13.556B (range $13.286B–$13.861B) imply analysts still model a meaningful earnings recovery, but the absence of a published average price target means implied upside cannot be calculated from the provided data — Data not available for a consensus target.
The signal strength here is weak and the dispersion is wide: the EPS estimate range of $2.76–$2.91 is tight (about 5.6% spread), suggesting analysts agree on the near-term recovery magnitude, but the revenue range of $13.29B–$13.86B (4.3% spread) and the split between Overweight/Outperform ratings and fresh downgrades to Neutral/Market Perform reveal genuine disagreement about durability. The bullish camp (JP Morgan, Barclays, Baird) is effectively betting that Q3 was the trough and that European stabilization plus cost actions restore margins toward historical levels, while the downgrades price in the risk that the 5.1% revenue decline and 1.60% operating margin are structural. With only one formal target and a stock that gapped -22.5% on earnings, price discovery is inefficient and headline-driven — expect elevated volatility around the next print, and treat the institutional accumulation by Ananym and Kiltearn as the strongest contrarian signal in the dataset rather than the sell-side consensus.
Bulls vs Bears: LKQ Investment Factors
The bear case currently has the stronger near-term evidence: three consecutive quarters of YoY revenue decline, a collapse in operating margin to 1.60%, a quarterly net loss, and a -42.80 point relative-strength gap to SPY are facts, whereas the bull case rests on a consensus $2.83 EPS recovery that has not yet appeared in reported results. The bull side is not weak, however — a 12.1% FCF yield, 8.50x EV/EBITDA, 1.18x book, and activist accumulation by Ananym and Kiltearn make this one of the cheapest large-cap distributors in the market, and the 17.3% bounce off $17.10 suggests capitulation selling has been absorbed. The single most important tension is whether Q3's 1.60% operating margin was a cyclical air-pocket in European and North American collision volumes or evidence of structural margin erosion and share loss; if margins normalize toward the historical 6–8% range the stock is deeply undervalued, but if 1.60% marks a lower structural base the value case is a trap. Until revenue and margins inflect, the evidence tilts toward a contested deep-value turnaround rather than a confirmed bottom.
Bullish
- Deep value across every multiple: At $20.05, LKQ trades at 0.56x sales, 1.18x book, 7.27x cash flow, and 8.50x EV/EBITDA — all at or below typical auto-parts distribution multiples (peers generally low-to-mid teens on EV/EBITDA and 1.5–3.0x on sales). The PS ratio has collapsed from 4.77x in Q4 2022 and 3.65x in Q4 2023, placing the stock at the absolute bottom of its own multi-year valuation band.
- Exceptional 12% FCF yield funds itself: TTM free cash flow of $610M against a $5.03B market cap implies roughly a 12.1% FCF yield, and Q3 operating cash flow of $411M comfortably funded $39M capex, $76M dividends, $226M debt repayment, and $30M buybacks. This is a self-funding business trading at a cash-flow valuation that prices in near-permanent decline.
- Analyst consensus still models recovery: The lone consensus EPS estimate of $2.83 (tight $2.76–$2.91 range, ~5.6% spread) implies earnings roughly 7x the current price, and the $13.556B revenue estimate sits above the current run-rate. Recent institutional actions skew positive — JP Morgan Overweight maintained October 30, Barclays upgraded to Overweight October 26, Baird Outperform maintained — suggesting the sell-side majority sees Q3 as the trough.
- Activist accumulation at lower prices: Ananym Capital bought another $11M of LKQ amid a 26% pullback (February 2026) and Kiltearn added 265,000 shares for an $8M bet, both accumulating into prior drawdowns. Sophisticated value institutions building positions through a -50.86% max drawdown is the strongest contrarian signal in the dataset.
Bearish
- Three straight quarters of revenue decline: Q3 2026 revenue of $3.319B fell 5.14% YoY, following Q2's $3.408B (down 6.4% YoY) and a roughly flat Q1 — an unambiguous deteriorating trend. A distributor with negative organic growth cannot compound earnings through operating leverage, so the bull case must rest entirely on stabilization and re-rating rather than growth.
- Operating margin collapsed to 1.60%: Q3 operating income fell to $53M (1.60% margin) from $274M (7.83%) a year earlier, and net income swung to -$26M (-0.78% margin) from +$180M. Gross margin held at 37.24% versus 38.33%, so the damage is below the gross line — SG&A of $959M against $1.236B gross profit plus $56M interest and a $32M tax charge on $5M pre-tax income crushed the bottom line.
- Idiosyncratic underperformance, broken chart: LKQ is down 33.21% over one year versus SPY's +9.59%, a -42.80 point relative-strength gap, and -33.23% YTD against SPY's +7.83%. The October 23 single-session gap of -22.5% (from $22.47 to $17.42) and a -50.86% max drawdown confirm this is company-specific deterioration, not sector beta.
- Fresh downgrades and Strong Sell flag: Roth Capital cut to Neutral from Buy on October 26 and Barrington Research cut to Market Perform from Outperform on October 23, the day of the earnings gap, while Zacks carries a 'Strong Sell' rating. Coverage is thin — only one formal price target — so price discovery is inefficient and headline-driven, with elevated volatility likely around the next print.
LKQ Technical Analysis
LKQ is in an unambiguous, sustained downtrend: the stock is down 33.21% over the past year and 33.23% YTD, with a maximum drawdown of -50.86% from its trailing peak. At $20.05, the shares sit in the bottom quartile of the 180-day range, roughly 29% above the $17.10 closing low set on October 27, 2026, but approximately 29% below the $28.10 May 2026 high — positioning that reflects a broken chart rather than a healthy consolidation. Relative strength confirms the damage: LKQ has underperformed SPY by 42.80 percentage points over one year and 41.06 points YTD, meaning this is idiosyncratic deterioration, not merely sector beta.
Short-term momentum remains negative but is decelerating in its rate of decline: the stock is down 8.99% over one month and 19.35% over three months, versus a 30.60% six-month decline, implying the sharpest damage occurred in the July–October window. The critical event was the October 23 gap from $22.47 to $17.42 (-22.5% in a single session) on Q3 results, followed by a genuine 17.3% rebound off the $17.10 low to $20.05 — a tentative higher-low structure that suggests capitulation selling has been absorbed. That said, the 1-month decline (-8.99%) still lags SPY's -4.99%, and relative strength of -4.00 points over the month shows no leadership emerging yet; the bounce looks like mean reversion inside a downtrend until proven otherwise.
Key technical levels are now well defined: support sits at the $17.10–$17.42 gap-fill zone, and a decisive break below $17.10 would signal a fresh leg lower with little visible structural support, likely targeting the mid-teens. Resistance is layered at $22.47 (the pre-gap close, a natural fill target) and then $24.50–$26.00, where the stock traded for most of August and September; reclaiming $22.47 would be the first credible evidence of trend repair. Volatility is elevated — a -50.86% max drawdown and a 22.5% single-day gap imply realized volatility far above market averages, so position sizing should assume gap risk; the current ratio of 1.67 and $5.31M daily volume provide adequate liquidity, but the stock's behavior argues for smaller, staged entries rather than full-size positioning.
Beta
—
—
Max Drawdown
-50.9%
Largest decline past year
52-Week Range
—
Price range past year
Annual Return
-37.9%
Cumulative gain past year
| Period | LKQ Return | S&P 500 |
|---|---|---|
| 1m | -10.8% | -2.3% |
| 3m | -23.4% | -2.8% |
| 6m | -20.9% | +2.1% |
| 1y | -37.9% | +12.3% |
| ytd | -35.2% | +10.6% |
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LKQ Fundamental Analysis
The revenue trajectory has turned negative and is deteriorating sequentially: Q3 2026 revenue of $3.319B fell 5.14% YoY from $3.499B, following $3.408B in Q2 (down 6.4% YoY from $3.642B) and $3.469B in Q1 (roughly flat versus $3.463B). The trend is unambiguous — three consecutive quarters of YoY decline, with the Q3 contraction the second-worst of the sequence — and the segment mix offers little offset, with Europe at $1.453B and Specialty at just $465M, meaning the largest geographic exposure is also the source of the drag (likely EUR translation and soft European collision demand). For the investment case, this is the crux: a distributor with negative organic growth cannot compound earnings through operating leverage, so the bull thesis must rest on stabilization and multiple re-rating rather than growth.
Profitability has compressed sharply and the company slipped into a quarterly loss: Q3 2026 net income was -$26M (net margin -0.78%) versus +$180M in Q3 2025, with operating income collapsing to $53M (1.60% operating margin) from $274M (7.83%) a year earlier. Gross margin held up better at 37.24% versus 38.33% a year ago, which tells you the damage is below the gross line — SG&A of $959M against $1.236B of gross profit, plus $56M of interest expense and a $32M tax charge on just $5M of pre-tax income, crushed the bottom line. The TTM picture is less alarming (net margin 4.36%, gross margin 38.03%, operating margin 7.81%), but the direction of travel is clearly negative, and a 1.60% quarterly operating margin is far below the 6–8% range LKQ has historically sustained.
The balance sheet is the strongest part of the story and the core of any value case: debt-to-equity of 0.774, a current ratio of 1.67, and TTM free cash flow of $610M against a $5.03B market cap imply an FCF yield of roughly 12.1% — exceptional for a business with this asset base. Q3 operating cash flow of $411M funded $39M of capex, $76M of dividends, $226M of debt repayment, and $30M of buybacks, demonstrating genuine self-funding capacity; ROE of 9.29% is modest but positive, and the 4.01% dividend yield is covered by the $610M FCF. The risk is not solvency but earnings quality — inventory days of roughly 141 and a cash conversion cycle near 95 days tie up working capital, and Q1's -$96M FCF shows seasonal swings can be violent, but the full-year cash generation supports the thesis that the equity is cheap on cash flow even as reported earnings disappoint.
Quarterly Revenue
$3.3B
2026-09
Revenue YoY Growth
-5.1%
YoY Comparison
Gross Margin
37.2%
Latest Quarter
Free Cash Flow
$610000000.0B
Last 12 Months
Revenue & Net Income Trends (2 Years)
Revenue Breakdown
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Valuation Analysis: Is LKQ Overvalued?
Because trailing net income remains positive (TTM EPS of $0.079, PE of 12.85x), the PE ratio is the appropriate primary metric, though its usefulness is limited by the near-zero earnings base; the more informative lens is EV/EBITDA at 8.50x and price-to-sales at 0.56x. The forward PE of -1.21x is not economically meaningful — it reflects a negative PEG input rather than a negative earnings forecast, and the analyst consensus EPS estimate of $2.83 implies the market expects a sharp earnings recovery from the current depressed run-rate. That gap between a 12.85x trailing PE on trough earnings and a consensus $2.83 forward EPS (roughly 7x the current price) is the entire valuation debate: either earnings normalize and the stock is deeply undervalued, or the Q3 loss marks a lower structural earnings base.
On peer comparison, LKQ screens cheap across every metric: PS of 0.56x, price-to-book of 1.18x, price-to-cash-flow of 7.27x, and EV/EBITDA of 8.50x are all at or below typical auto-parts distribution multiples, where peers generally trade in the low-to-mid teens on EV/EBITDA and 1.5–3.0x on sales. The discount is quantifiable and large — roughly a 30–50% EV/EBITDA discount and a PS ratio less than a quarter of LKQ's own 2023 levels — but it is not obviously unjustified: a 5.1% revenue decline, a quarterly net loss, and 1.60% operating margins are materially inferior to the stable, mid-single-digit-growth, 8–10% margin profile of healthier distributors. The market is pricing LKQ as a melting ice cube, and the burden of proof is on management to show margin stabilization.
Historical context reinforces how extreme the de-rating has been: LKQ's PS ratio has collapsed from 4.77x in Q4 2022 and 3.65x in Q4 2023 to 0.56x today, while PE has ranged from 8.2x to 29.0x over the same period and now sits at 12.85x. Price-to-book of 1.18x is near the bottom of its multi-year band (versus 2.6x in 2022–2023), and the dividend yield of 4.01% is roughly five times its 2022–2024 level of ~0.8%, a classic signal of price-driven yield expansion. This is unambiguously the bottom of LKQ's own valuation range — which historically has marked either a generational value entry or a value trap, and the Q3 print tilts the evidence toward the latter until revenue and margins inflect.
PE
12.9x
Latest Quarter
vs. Historical
Low-End
5-Year PE Range 8x~24x
vs. Industry Avg
13.4x
Industry PE ~13.4x*
EV/EBITDA
8.5x
Enterprise Value Multiple
Investment Risk Disclosure
Financial and operational risks center on the speed of the margin collapse and the working-capital intensity of the model. Q3 operating margin of 1.60% versus 7.83% a year earlier, a net loss of -$26M, and a $32M tax charge on just $5M of pre-tax income show how little cushion exists between gross profit and the bottom line when SG&A of $959M is spread over a shrinking revenue base. Revenue has declined YoY for three consecutive quarters (-5.14% in Q3, -6.4% in Q2), with Europe — the largest segment at $1.453B — the source of the drag, creating geographic concentration risk. Inventory days near 141 and a cash conversion cycle around 95 days tie up capital, and Q1's -$96M FCF demonstrates that seasonal swings can be violent even though full-year FCF of $610M remains healthy. Debt-to-equity of 0.774 and a current ratio of 1.67 mean solvency is not the issue; earnings quality and the durability of the revenue base are.
Market and competitive risks are dominated by valuation compression and the possibility that the discount is deserved. LKQ trades at 8.50x EV/EBITDA and 0.56x sales versus peers at low-to-mid teens EV/EBITDA and 1.5–3.0x sales — a 30–50% EV/EBITDA discount that is not obviously unjustified given a 5.1% revenue decline, a quarterly loss, and 1.60% margins versus the 8–10% margin profile of healthier distributors. The stock's beta-like sensitivity is severe: it underperformed SPY by 42.80 points over one year and 41.06 points YTD, and its -22.5% single-day gap on October 23 shows headline-driven volatility far above market averages. Competitive disruption from autonomous-vehicle concerns (cited in coverage of Ananym's accumulation) and soft European collision demand add structural overhangs, while thin coverage — only one formal price target — means sell-side downgrades (Roth to Neutral, Barrington to Market Perform) can move the stock disproportionately.
The worst-case scenario is a self-reinforcing downgrade cycle: Q4 results confirm that 1.60% operating margin is the new base rather than a trough, the consensus $2.83 EPS estimate is cut sharply, and the stock breaks decisively below the $17.10 October 27 low, which would signal a fresh leg lower with little visible structural support and likely target the mid-teens. From the current $20.05, a retest of the $17.10 low implies roughly -15%, while a break to the mid-teens ($15) would imply about -25%; the -50.86% max drawdown from the trailing peak shows how far this name can fall when the thesis breaks. A realistic adverse case is a -15% to -25% decline to the $15–$17 zone, with the risk that a value trap keeps the stock depressed for multiple quarters even if it does not fall further.
FAQ
From a risk/reward standpoint LKQ offers an unusually asymmetric setup for a value investor: at $20.05 the stock trades at 8.50x EV/EBITDA, 0.56x sales, and 1.18x book with a roughly 12.1% FCF yield, and it has already rebounded 17.3% off its $17.10 October 27 low. The downside is quantifiable — a retest of $17.10 implies about -15% and a break to the mid-teens implies roughly -25%, against a bull-case range of $26.00–$28.10 that implies +30% to +40% if margins normalize toward the 6%+ levels of Q1 and Q2 2026. The catch is that the recovery is a forecast, not a fact: revenue has fallen YoY for three straight quarters (-5.14% in Q3) and Q3 operating margin collapsed to 1.60% with a -$0.10 EPS loss, while sell-side coverage is split (JP Morgan, Barclays, and Baird positive; Roth and Barrington cut to Neutral/Market Perform; Zacks 'Strong Sell'). It is a reasonable buy only for patient, risk-tolerant investors who size positions for gap risk and accept that the thesis resolves on Q4 margin evidence; it is not a good buy for those needing near-term earnings momentum or a published consensus price target, since only one formal target exists in the dataset.