Why LKQ (LKQ) Is Falling Today

NEW YORK (TheStreet) -- LKQ (LKQ) was falling 7.1% to $27.01 Thursday after missing analysts' expectations for earnings and revenue for the fourth quarter.

The auto parts company reported earnings of 26 cents a share for the fourth quarter. Capital IQ Consensus Estimate called for earnings of 29 cents a share for the quarter. Revenue rose 23.3% from the year-ago quarter to $1.32 billion, while analysts expected revenue of $1.33 billion.

For the full-year 2014 LKQ expects earnings of between $1.30 and $1.40 a share, while analysts expect $1.38 a share. The company expects net income of between $400 million and $430 million in 2014. LKQ also expects organic revenue growth of between 8% and 10$ for parts and services in 2014.

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TheStreet Ratings team rates LKQ CORP as a "buy" with a ratings score of A-. TheStreet Ratings Team has this to say about their recommendation:

"We rate LKQ CORP (LKQ) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its robust revenue growth, growth in earnings per share, compelling growth in net income, good cash flow from operations and solid stock price performance. We feel these strengths outweigh the fact that the company has had somewhat disappointing return on equity."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The revenue growth came in higher than the industry average of 10.5%. Since the same quarter one year prior, revenues rose by 27.7%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • LKQ CORP has improved earnings per share by 33.3% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, LKQ CORP increased its bottom line by earning $0.88 versus $0.71 in the prior year. This year, the market expects an improvement in earnings ($1.08 versus $0.88).
  • The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and greatly outperformed compared to the Distributors industry average. The net income increased by 35.9% when compared to the same quarter one year prior, rising from $54.05 million to $73.45 million.
  • Net operating cash flow has significantly increased by 115.26% to $131.44 million when compared to the same quarter last year. In addition, LKQ CORP has also vastly surpassed the industry average cash flow growth rate of 59.22%.
  • Powered by its strong earnings growth of 33.33% and other important driving factors, this stock has surged by 28.71% over the past year, outperforming the rise in the S&P 500 Index during the same period. We feel that the stock's sharp appreciation over the last year has driven it to a price level which is now somewhat expensive compared to the rest of its industry. The other strengths this company shows, however, justify the higher price levels.
  • You can view the full analysis from the report here: LKQ Ratings Report

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