- Raymond James analyst Sam Darkatsh reiterated an Outperform rating on the shares of LKQ Corp (NASDAQ:LKQ) and raised the price target from $60 to $65.
- The analyst reduced EPS estimates to slightly above consensus levels ahead of LKQ’s February release of Q4 results.
- The analyst views Q4 North America P&S organic sales as likely still healthy given pricing benefits and likely double-digit Boyd Group comparable sales.
- While Vehicle Miles Driven / U.S. Gas Consumption have moderated to approximately flat y/y, LKQ comparable structurally benefit from mid-single-digit y/y 4QTD PPI for auto parts manufacturing, improving Taiwanese aftermarket parts availability, and above-market fill rates driven by salvage/recycled inventory, the analyst said.
- The analyst calculates Q4 gross interest expense closer to $29 million. Given LKQ’s recently amended revolver facility and accounting for current forward rates, the analyst estimates FY23 interest expense of $125 million, versus the Street at $85 million.
- European FX trends were favorable versus late-October views and prior guidance, added the analyst.
- Similarly, the analyst’s model is now updated to reflect (minor) sequential changes in steel/precious metals prices.
- Trimmed estimates notwithstanding, the analyst believes the stock still bullishly implies asymmetrically low assumptions for LT sales growth.
- LKQ has demonstrated an ability to get price in its core North America P&S business, has retained profits from steel and precious metal inflation to increasingly become a true inflation hedge, said the analyst.
- However, the above factors, the analyst remarks, may be overshadowed in the short-term by soft U.S. gasoline consumption demand data in the U.S. and geopolitical tensions in Europe.
- Price Action: LKQ shares are trading higher by 0.19% at $58.11 on the last check Friday.
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