LKQ Corporation LKQ reported second-quarter 2026 adjusted earnings of 67 cents per share, missing the Zacks Consensus Estimate of 73 cents by 8.2%. The bottom line declined 20.2% from 87 cents reported in the year-ago quarter.
Quarterly revenues fell 3% year over year to $3.41 billion and missed the consensus mark of $3.50 billion by 2.7%. Europe’s ERP implementation challenges overshadowed positive organic growth in North America and Specialty.
LKQ Corporation Price, Consensus and EPS Surprise
LKQ Corporation price-consensus-eps-surprise-chart | LKQ Corporation Quote
LKQ Sees North America Return to Growth
North America generated revenues of $1.47 billion, up from $1.44 billion in the prior-year quarter. Parts and services organic revenues increased 0.5%, marking the segment’s first quarterly organic growth since 2023.
Pricing actions to recover tariff costs and offset inflation supported sales, while repairable claims declined between 1% and 3%. Other revenues advanced 20.5% on higher metals prices and increased volumes. Alternative-parts utilization exceeded 40%, reaching a record level.
North America’s gross profit increased to $622 million from $619 million. However, gross margin contracted 40 basis points to 42.5% due to the dilutive impact of tariff-related pricing, lower vendor rebates and an unfavorable customer mix.
North America’s quarterly segment EBITDA declined to $207 million from $224 million a year earlier. The segment EBITDA margin contracted to 14.1% from 15.5%, partly reflecting a $10 million legal reserve that reduced the margin by roughly 70 basis points.
LKQ Corp Faces Europe ERP Setback
Europe’s revenues declined to $1.46 billion from $1.61 billion a year earlier. Organic parts and services revenues fell 12.6%, partly offset by a 2.1% foreign-exchange benefit and a 0.9% contribution from acquisitions and divestitures.
The rollout of a common ERP platform in Germany disrupted service and reduced quarterly revenues by an estimated $140 million. Soft demand and weaker commercial execution in the United Kingdom and Benelux added to the pressure.
Segment EBITDA fell to $109 million from $151 million, while the EBITDA margin contracted to 7.5% from 9.4%. The company estimated that the German ERP disruption lowered EBITDA by roughly $50 million, while volume pressure in the United Kingdom and Benelux reduced it by about $30 million.
LKQ Specialty Sales Rise but Costs Weigh
Specialty revenues increased to $488 million from $465 million in the second quarter of 2025. Organic growth was 4.5%, supported by higher volumes across marine, recreational vehicle and automotive product lines.
Gross profit rose to $125 million from $118 million, with the margin improving 20 basis points to 25.6%. Tariff refunds and increased volumes more than offset an unfavorable sales mix.
Despite the top-line growth, segment EBITDA declined to $33 million from $39 million. The EBITDA margin fell to 6.7% from 8.5%, reflecting an $8 million increase in credit losses and higher transportation-related expenses.
LKQ Corp Margins Contract as SG&A Climbs
Consolidated gross profit decreased 2.6% to $1.32 billion. Gross margin edged up to 38.8% from 38.6% as improved pricing and product mix in Europe helped offset weaker sales volumes.
Selling, general and administrative expenses rose 3.3% to $990 million and increased to 29% of revenues from 27.3%. North America’s costs included a $10 million legal reserve, while Europe incurred higher transportation expenses and unfavorable currency effects.
Operating income dropped 24.7% to $225 million, with the operating margin shrinking to 6.6% from 8.5%. Adjusted segment EBITDA declined 15.6% to $349 million, and the related margin contracted 160 basis points to 10.2%.
LKQ Cash Flow Improves in the Quarter
LKQ generated operating cash flow of $111 million and free cash flow of $60 million during the second quarter. For the first six months of 2026, operating cash flow totaled $55 million, while free cash flow was negative $36 million.
As of June 30, 2026, the company had $301 million in cash, down from $319 million as of Dec. 31, 2025. It had $4 billion in total debt and available liquidity of $1.93 billion. Its total leverage ratio was 2.8 times EBITDA.
LKQ returned $129 million to shareholders during the quarter, including $52 million used to repurchase 1.9 million shares and $77 million in dividends. On July 28, 2026, the company also declared a quarterly dividend of 30 cents per share.
LKQ Corp Cuts 2026 Outlook
The company now expects 2026 organic parts and services revenues to decline between 1% and 3% compared with the previous estimated range of a 0.5% decline to 1.5% growth.
Adjusted earnings per share are projected between $2.60 and $2.90, down from the prior forecast of $2.90-$3.20. Operating cash flow guidance is projected to be in the range of $825 million to $1.03 billion, down from the earlier estimate of $900 million to $1.10 billion.
Free cash flow is now expected between $625 million and $775 million compared with the previously expected range of $700-$850 million. The revised outlook assumes a more gradual recovery in Germany and continued softness in the United Kingdom and Benelux. The company’s strategic review remains active, with LKQ continuing discussions with multiple parties.
LKQ currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Key Releases From Auto Space
General Motors Company GM reported second-quarter 2026 adjusted earnings of $3.57 per share, up 41.3% year over year. The figure beat the Zacks Consensus Estimate of $3.13 by 14.06%. Revenues increased 1.9% to $48.03 billion and surpassed the consensus estimate of $46.56 billion by 3.15%. Strong pricing, lower costs and disciplined incentives supported results. General Motors raised its full-year adjusted EBIT guidance to $14-$16 billion from $13.5-$15.5 billion. Adjusted earnings are now projected at $12-$14 per share, up from the prior range of $11.50-$13.50.
Tesla, Inc. TSLA reported second-quarter 2026 adjusted earnings of 33 cents per share, which declined 17.5% year over year. The figure missed the Zacks Consensus Estimate of 50 cents by 34%. Revenues advanced 25.5% to $28.24 billion and surpassed the consensus estimate of $25.81 billion by 9.41%. Tesla expects 2026 capital expenditures to exceed $25 billion and rise further over the next two to three years.
Genuine Parts Company GPC reported second-quarter 2026 adjusted earnings of $2.15 per share, beating the Zacks Consensus Estimate of $2.10 by 2.38%. The bottom line increased 2.4% from $2.10 in the year-ago quarter. Revenues rose 6% year over year to $6.54 billion and surpassed the consensus estimate of $6.39 billion by 2.36%. Genuine Parts reaffirmed its 2026 adjusted earnings guidance of $7.50-$8 per share and total sales growth outlook of 3-5.5%. Genuine Parts ended June with $2.3 billion of liquidity, including $559 million in cash.
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This article originally published on Zacks Investment Research (zacks.com).
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