Nasdaq:LKQ
LKQ CORP
A premier North American aftermarket automotive parts distributor with over $13 billion in annual revenue and a robust inventory of new and used replacement parts.
Key Metrics
Investment Thesis
Bull Case
Investors may find value in LKQ due to its dominant market position and massive inventory moat that ensures high product availability and customer stickiness. The company's ability to generate robust operating cash flow of nearly $1 billion provides a strong foundation for dividends, share repurchases, and weathering economic headwinds in the cyclical auto parts sector.
Bear Case
Bearish investors should note the declining revenue trend over the last two years and the shrinking net income which has fallen from over $1 billion to under $650 million recently. The company carries significant retained earnings deficits and other shareholders' equity liabilities that could indicate underlying balance sheet stress or aggressive accounting adjustments impacting its long-term valuation.
About LKQ CORP
LKQ Corporation is a leading distributor of aftermarket automotive parts serving the North American market through its extensive network of independent retailers and direct-to-consumer channels. The company generates revenue primarily by selling new and used replacement parts for vehicles, leveraging massive inventory holdings and deep supplier relationships to meet diverse consumer needs. Operating across key regions including the United States and Canada, LKQ provides essential components for vehicle repair and maintenance to a wide array of independent shops and online customers.
Analysis
Management Discussion
In 2025, LKQ reported revenue of $13.65 billion and net income of $608 million, reflecting a slight contraction from the previous year's figures but maintaining consistent operational cash flow generation. While operating profit remained strong at $993 million, the company faced pressure on margins evidenced by a lower cash flow to net income ratio compared to prior periods, suggesting increased working capital needs or cost pressures. Despite a decline in revenue from 2024 levels, the business continues to generate significant positive cash flow from operations of over $1 billion.
Industry Overview
The aftermarket automotive parts industry is a resilient, cyclical sector driven by vehicle ownership rates and the necessity of repairs rather than new car purchases. Competition is fierce among distributors who must manage large inventories efficiently while navigating supply chain volatility and evolving consumer preferences for online purchasing.
Financial Statements
Income Statement
Balance Sheet
Cash Flow
| Metric | 2022 | 2023 | 2024 | 2025 |
|---|---|---|---|---|
| Revenue | $12.79B | $13.87B | $14.36B | $13.65B |
| Cost of Revenue | $7.57B | $8.29B | $8.74B | $8.39B |
| Gross Profit | $5.22B | $5.58B | $5.61B | $5.26B |
| Operating Expenses | $3.64B | $4.22B | $4.41B | $4.27B |
| Operating Income | $1.58B | $1.36B | $1.20B | $993.0M |
| G&A | $3.54B | $3.87B | $3.92B | $3.81B |
| Stock-Based Comp | $38.0M | $40.0M | $30.0M | $34.0M |
| D&A | $264.0M | $319.0M | $406.0M | $418.0M |
| Depreciation | $169.0M | $193.0M | $225.0M | $226.0M |
| Amortization | $95.0M | $126.0M | $182.0M | $183.0M |
| Other OpEx | $98.0M | $348.0M | $496.0M | $459.0M |
| Non-Operating Income | $-63.0M | $-122.0M | $-241.0M | $-193.0M |
| Interest Expense | $-78.0M | $-214.0M | — | — |
| Pre-Tax Income | $1.52B | $1.24B | $958.0M | $800.0M |
| Income Tax | $385.0M | $306.0M | $273.0M | $204.0M |
| Continuing Ops | $1.14B | $944.0M | $693.0M | $597.0M |
| Discontinued Ops | $6.0M | $-6.0M | $0 | $11.0M |
| Net Income | $1.15B | $938.0M | $693.0M | $608.0M |
| Minority Interest | $0 | $0 | $0 | $0 |
| Net to Common | $1.15B | $938.0M | $693.0M | $608.0M |
| Metric | 2022 | 2023 | 2024 | 2025 |
|---|---|---|---|---|
| Current Assets | $4.26B | $4.87B | $4.91B | $5.25B |
| Cash & Equivalents | $278.0M | $299.0M | $234.0M | $319.0M |
| Inventory | $2.75B | $3.12B | $3.22B | $3.43B |
| Prepaid Expenses | $230.0M | $283.0M | $330.0M | $299.0M |
| Other Current Assets | $998.0M | $1.17B | $1.12B | $1.20B |
| Long-Term Assets | $7.78B | $10.21B | $10.05B | $9.89B |
| PP&E (Net) | $1.24B | $1.52B | $1.52B | $1.45B |
| Intangibles | $653.0M | $1.31B | $1.15B | $1.07B |
| Goodwill | $4.32B | $5.60B | $5.45B | $5.41B |
| Operating Leases | $1.23B | $1.34B | $1.39B | $1.33B |
| Other LT Assets | $204.0M | $287.0M | $377.0M | $449.0M |
| Total Assets | $12.04B | $15.08B | $14.96B | $15.14B |
| Current Liabilities | $2.27B | $3.32B | $2.86B | $3.14B |
| Accounts Payable | $1.34B | $1.65B | $1.80B | $2.11B |
| Current Leases | $188.0M | $224.0M | $237.0M | $253.0M |
| Other Current Liab | $450.0M | $1.14B | $472.0M | $432.0M |
| Long-Term Liabilities | $4.30B | $5.58B | $6.06B | $5.44B |
| LT Operating Leases | $1.09B | $1.16B | $1.21B | $1.15B |
| Other LT Liab | $3.21B | $4.42B | $4.85B | $4.29B |
| Total Liabilities | $6.57B | $8.90B | $8.92B | $8.58B |
| Shareholders' Equity | $5.47B | $6.18B | $6.03B | $6.56B |
| Retained Earnings | $6.66B | $7.29B | $7.66B | $7.96B |
| AOCI | $-323.0M | $-240.0M | $-417.0M | $-57.0M |
| Treasury Stock | $2.39B | $2.42B | $2.79B | $2.95B |
| Total L&E | $12.04B | $15.08B | $14.96B | $15.14B |
| Metric | 2022 | 2023 | 2024 | 2025 |
|---|---|---|---|---|
| Net Income (CFO) | $1.15B | $938.0M | $693.0M | $608.0M |
| Non-Cash Adjustments | $-539.0M | $529.0M | $-135.0M | $304.0M |
| Working Capital Changes | $639.0M | $-111.0M | $563.0M | $151.0M |
| Cash from Operations | $1.25B | $1.36B | $1.12B | $1.06B |
| Cash from Investing | $172.0M | $-2.44B | $-406.0M | $185.0M |
| Share Buybacks | $1.04B | $38.0M | $360.0M | $159.0M |
| Dividends Paid | $284.0M | $302.0M | $318.0M | $310.0M |
| Cash from Financing | $-1.39B | $1.10B | $-746.0M | $-1.19B |
| FX Effect | $-24.0M | $5.0M | $-29.0M | $36.0M |
| Net Change in Cash | $4.0M | $21.0M | $-60.0M | $93.0M |
| Beginning Cash | $274.0M | $278.0M | $299.0M | $239.0M |
| Ending Cash | $278.0M | $299.0M | $239.0M | $332.0M |
Frequently Asked Questions
How does LKQ CORP make money?
The company operates primarily through three main segments: New Parts, which involves the distribution of factory-fresh components from major manufacturers; Used Parts, focused on sourcing and selling pre-owned components at competitive prices; and Wholesale/Other, encompassing sales to independent retailers, online platforms, and other commercial channels that round out its diversified revenue stream.
What are the main risks for LKQ?
Fluctuations in used parts supply due to economic downturns or changes in vehicle lifecycles can directly impact margins and inventory turnover rates. Rising interest rates increase the cost of capital required to maintain the substantial inventory levels and finance operations, potentially squeezing profitability. Economic recession trends could reduce consumer discretionary spending on auto repairs, leading to lower demand for aftermarket parts.
What is LKQ's competitive advantage?
LKQ leverages one of the industry's largest physical inventories exceeding $3.4 billion, ensuring immediate availability for customers without long shipping delays. The firm benefits from strong bargaining power with suppliers and a highly efficient logistics network that minimizes costs while maximizing sales velocity across its vast dealer base.
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Not financial advice. All content is for informational purposes only. Data may contain errors. Consult a qualified financial advisor before making investment decisions.