We undertook the unenviable task of reading the proxy for every company under coverage (and one we don’t cover: TSLA).
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LKQ hosted an investor day at its Tamworth DC pre-market on 5/31. 2018 guidance was maintained; though we thought clarity on near-term cost pressures/offsets was still missing and “cautiously optimistic” on EU Rev was less than we hoped for. However, given this day was planned before the Q1 blow up, we thought mgt. did a good job of articulating the likely original plan for EU integration, NA algorithm, and capital allocation.
Using Return on Invested Capital as a lens, we take a look at which companies and sub-industries capture the highest returns within the automotive value chain. We calculate ROIC across 27 companies within industries including dealers, OEMs, parts suppliers, aftermarket retailers, and service providers.
Our 11th Annual Global Transport Conference takes place on 05/22/18 - 05/23/18 in NYC, and we have ~60 Transport, Airline, Cruise, and Auto Retail companies scheduled to present and/or host 1x1 meetings.
Ahead of LKQ’s May 31st Analyst Day in London and their attendance for 1 x 1 meetings at our Wolfe Transportation conference on May 23rd we have put together a package of: a tear sheet, 30 questions for management, a financial profile, SOTP, and an annual scenario model.
Yesterday (5/9/2018), Sears (not covered) announced a partnership with Amazon (c/b S. Mushkin) to sell and install any brand of tire at Sears’ 400+ Auto Center locations. In Feb. 2018, Amazon began carrying Die Hard starters, chargers, and Gold AGM batteries (expensive). Stock reaction was mixed with the group only modestly trailing (+0.5%) the S&P 500 (+1.0%).
LKQ reported Q1 results this morning (4/27/2018). Total revenue of $2.72B beat consensus of $2.62B and our $2.69B. Adj. EPS of $0.55 missed consensus $0.59 and our $0.60. 2018 guidance (excludes Stahlgruber) was lowered to 4-5.5% organic revenue growth (from 4-6%) and $2.20-$2.30 in EPS (from $2.30-$2.40). Shares declined 19% versus S&P 500 +1%.
Spin-cos are all of the rage, particularly within Autos given secular changes. The feasibility of a spin-off is one question we are receiving from investors. In response, we explored a European spin-off for LKQ and came away mixed viewing a spin-off as feasible, but better for downside support rather than an upside catalyst at current valuation.
LKQ reported Q4 results this morning (2/23/2018). Total revenue of $2,470 beat consensus of $2,377 and met our $2,470. Adj. EPS of $0.41 just missed consensus/our $0.42. 2018 guidance (excludes Stahlgruber) includes 4-6% organic parts and service revenue growth and $2.30-$2.40 in EPS, which missed our previous estimate of $2.46.
Most of you cover 50 – 200 stocks and therefore don’t have the liberty of being as into the weeds on every name – that’s our job. To help you do yours, we have created a comprehensive, but chart-heavy, guide to our coverage that is meant to have shelf life and that can be referred back to when you are ready to dig more into our coverage.
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