What Happened:
Shares of automotive parts company LKQ (NASDAQ:LKQ) fell 15.2% in the afternoon session after the company reported second-quarter earnings results, with its revenue, organic revenue, and EPS falling short of Wall Street's estimates. On top of that, it significantly lowered its full-year organic revenue and EPS guidance. The company attributed the weakness to "lower repairable claims in North America and difficult macroeconomic conditions in Europe." While the headwinds are considered temporary, they are expected to persist till the end of the year, potentially dampening the market's optimism towards the stock, at least in the near term. Overall, this quarter could have been better.
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What is the market telling us:
LKQ's shares are not very volatile than the market average and over the last year have had only 2 moves greater than 5%. Moves this big are very rare for LKQ and that is indicating to us that this news had a significant impact on the market's perception of the business.
The biggest move we wrote about over the last year was 3 months ago, when the stock dropped 14.8% on the news that the company reported first-quarter results with organic revenue, reported revenue, and EPS all falling below Wall Street's estimates. However, full-year guidance was maintained for adjusted EPS and free cash flow. The company stated that "despite the revenue headwinds we encountered in the first quarter, we are maintaining our adjusted earnings per share and free cash flow guidance. We have confidence in our team's abilities and their track record of swiftly and effectively implementing action plans to address our cost structure, and have already made meaningful changes to reflect current levels of demand." Overall, the results could have been better.
LKQ is down 17.7% since the beginning of the year, and at $38.90 per share it is trading 32.3% below its 52-week high of $57.45 from July 2023. Investors who bought $1,000 worth of LKQ's shares 5 years ago would now be looking at an investment worth $1,410.
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