Analyst Note| Dawit Woldemariam |
LKQ reported strong second-quarter results on the back of a strengthening demand environment. Sales in the quarter reached $3.4 billion, 31% higher than the prior-year quarter (up 6% compared with second quarter 2019). A rebound in vehicle miles driven continues to proliferate as more drivers have returned to roadways. Management highlighted data from the U.S. Department of Energy that showed fuel consumption is approximately 5% below prepandemic levels (second quarter of 2019). As a result, collision and auto claims have both continued to increase, which has served as a tailwind for LKQ’s business. In turn, we increased our fair value estimate to $41 from $38 previously to reflect stronger near-term revenue and margin expectations.