LKQ Corporation
CEO : Mr. Dominick P. Zarcone
Quarterly earnings growth(YoY,%)
| Period | Revenue | Operating Income | EPS | Release Date |
|---|---|---|---|---|
| 2022 Q4 | -5.8% YoY | 6.4% | -11.0% | 2023-02-23 |
Nick Zarcone says,
Revenue and Income
- Revenue for Q4 2022 was $3 billion, decreased by 5.8% compared to Q4 2021
- Net income for Q4 2022 was $193 million, decreased by 18.3% compared to Q4 2021
- Adjusted net income for Q4 2022 was $209 million, decreased by 17.5% compared to Q4 2021
- Diluted earnings per share for Q4 2022 was $0.72, decreased by 11% compared to Q4 2021
- Adjusted diluted earnings per share for Q4 2022 was $0.78, decreased by 10.3% compared to Q4 2021
Segment Highlights
- North American segment’s organic revenue increased 10.3% in Q4 2022
- Europe segment’s organic revenue growth of parts and services increased 4.6% in Q4 2022
- Specialty segment’s organic revenue decreased 10.6% in Q4 2022
- Self Service segment’s organic revenue for parts and services increased 4.8% in Q4 2022
Other Highlights
- ESG is a vital part of LKQ’s strategy with sustainability as an integral mission
- MSCI upgraded LKQ to their highest ESG rating of AAA in December 2022
- LKQ was included in Sustainalytics’ 2023 Top-Rated ESG Companies list in January 2023
- State Farm announced the use of expanded non-OEM collision repair parts in most of the US, providing an opportunity for LKQ to compete and benefit the end consumer
- LKQ expanded its European salvage network with the acquisition of Rhenoy Group in February 2023
Rick Galloway says,
2022 Accomplishments
- Reported highest profitability in company history
- Generated free cash flow of just over $1 billion in 2022
- Achieved investment-grade ratings from all three major rating agencies
- Returned $284 million to shareholders through quarterly dividends and increased quarterly amount by 10% in October
- Repurchased roughly 20 million shares of LKQ stock for just over $1 billion
Segment Performance
- Wholesale North America posted a record fourth quarter segment EBITDA margin of 18.5%
- Europe delivered its highest-ever fourth quarter margin at 10.0%
- Specialty’s EBITDA margin declined 130 basis points compared to prior year
- Self Service profitability improved sequentially but remained on the low end of historical range
Consolidated Results
- Reported diluted earnings per share of $0.72 and adjusted diluted earnings per share of $0.78
- Operational performance showed year-over-year improvement but was more than offset by unfavorable effects from volatility in metals prices, foreign currency exchange effects, and higher interest rates
- Incur $11 million in restructuring expenses for a new global restructuring program, with projected cost savings of $20 million included in 2023 guidance
Cash Flows and Balance Sheet
- Produced $166 million in free cash flow during the quarter, bringing the year-to-date total to $1.28 billion
- Total debt of $2.7 billion with a total leverage ratio of 1.5 times EBITDA, comfortably inside target range of below 2 times
- Projected full year adjusted diluted EPS in the range of $3.90 to $4.20, with a midpoint of $4.05
2023 Guidance
- Assumes scrap and precious metals prices hold near December prices and the Ukraine Russia conflict continues without further escalation
- Expects organic parts and service revenue growth of between 6% and 8%
- Projects continuation of challenging conditions for Specialty from softening demand for RV-related products and Self Service related to commodity prices and input cost inflation
Q & A sessions,
Key Strategic Pillars
- Continuing to integrate businesses and simplify operating model
- Focusing on profitable revenue growth and sustainable margin expansion
- Driving high levels of cash flow for balanced capital allocation strategy
- Investing in future
Expansion in Europe
- Atracco operation in Sweden has been profitable and successful
- Recycling business in Europe is different from the US, largely driven by commodities
- Anticipate incremental opportunities to expand footprint, with regulatory changes in Europe as it relates to circular economy and utilization of green parts
- Slow process expected, no major shifts in near future, but optimistic about expanding recycling side in Europe
Partnership with Korea Zinc
- Korea Zinc is world-class organization in reclaiming and recycling non-ferrous metals
- Memorandum of understanding, with goal to develop profitable plan for both companies over next couple of years
- Recycling key elements out of existing EV batteries can become critical
Restructuring Plans
- Restructuring plan in Europe as part of continuous improvement plan
- Initiatives to drive organic revenue growth and better margins, particularly volume growth
- Anticipating margins in Europe to improve
Overall Outlook
- 2022 was another banner year, validated strength of strategy, business model, and people
- Well positioned to face challenges of new year and deliver positive year-over-year operating results for shareholders
- Continuous investment in future growth
No bad stock 