This auto parts maker is expected to grow earnings at an annual rate of 33.5% over the next five years.
LKQ Corporation (LKQ)
From Dow Theory Forecasts
Near-term and long-term consumer trends favor LKQ, a maker of aftermarket and recycled auto parts used in dealerships and repair shops. First, tight supplies for new vehicles in 2021 have boosted demand for older vehicles, which are more likely to require repair. Second, vehicle miles driven are rebounding but still haven’t reached pre-pandemic levels, suggesting room for more growth as conditions normalize. Additionally, the average age of a vehicle on U.S. roads has steadily climbed over the past 15 years, reaching a record 12 years in 2020.
Moreover, LKQ says two transformational changes within the automotive industry—electric vehicles and autonomous vehicles—should have little, if any, effect on its business model during this decade.
LKQ raised its 2021 profit guidance in July, prompting analysts to hike their estimates for sales for the September quarter (now expected to rise 7%), December quarter (6% growth), and 2022 (3%). LKQ has topped the consensus sales estimate in seven of the past eight quarters. LKQ expects full-year earnings per share to climb 39% to 47%. The consensus currently targets 44% growth, leaving some room for upside. Earning a Quadrix Overall score of 95, LKQ is a Focus List Buy and a Long-Term Buy.
Richard Moroney, CFA, Dow Theory Forecasts, dowtheory.com, 800-233-5922, September 20, 2021