LKQ Corporation LKQ, one of the leading providers of replacement parts, components and systems that are required to repair and maintain vehicles, is set to gain from the strategic acquisition of Uni-Select and cost-cutting efforts. However, softness in repairable claims and near-term weakness in its European business remain a concern.
Let’s see why you should retain this Zacks Rank #3 (Hold) stock in your portfolio.
Strategic Acquisitions & Cost Saving Efforts to Benefit LKQ
LKQ’s strategic acquisitions and partnerships are strengthening its growth outlook. The acquisition of Uni-Select in August 2023 has expanded its global vehicle parts distribution business. Through the integration of FinishMaster, a Uni-Select subsidiary, LKQ has already closed more than 100 branch locations in the United States, improving efficiency. The company expects to achieve $65 million in annualized cost synergies from Uni-Select by the end of 2026. Additionally, its June 2025 partnership with SYNETIQ aims to enhance the availability of recycled vehicle parts across Europe.
LKQ’s efforts to streamline operations and cut costs bode well. On its second-quarter earnings call, LKQ reported that it removed $125 million in costs over the past year and is on track to achieve an additional annual cost savings of $75 million this year. It is reviewing business units for potential asset sales and continues to simplify its distribution network through SKU rationalization. Back-office and systems improvements, leadership changes, and productivity initiatives further support cost efficiency and are likely to help partially offset lower revenue expectations.
LKQ is focused on growing its salvage business through strategic improvements. It has expanded capacity and upgraded its operating model with initiatives like Mega Yards and the Crystal River facility to boost part availability, fill rates, and margins. The company has also strengthened its proprietary machine learning algorithms to improve salvage vehicle procurement. Inventory management is being optimized, catalog accuracy is improving and cross-selling opportunities are also increasing. All these efforts support long-term growth.
In October 2025, LKQ completed the sale of its Self Service division to Pacific Avenue Capital Partners for $410 million. This transaction helped the company streamline its operations and bolster its financial position. The funds received from the sale were used to pay down debt and enhance the company’s leverage ratio.
LKQ’s investment-grade balance sheet and investor-friendly moves boost optimism. To shareholders’ delight, LKQ returned $353 million to shareholders in the first nine months of 2025 through $234 million in dividends and $119 million through share repurchases. In October 2024, LKQ boosted its stock repurchase authorization by $1 billion. As of the third-quarter end, LKQ had $1.6 billion remaining on the stock buyback authorization.
Softness in Repairable Claim, Gloomy Sales Outlook Ails LKQ
A key headwind for LKQ is the softness in repairable claims. Falling used car prices and rising insurance premiums are leading insurers to total more vehicles rather than repair them. This trend reduces demand for LKQ’s replacement parts. In the third quarter, repairable claims in North America kept falling at a pace of around 6%.
LKQ is facing near-term weakness in its European business. Organic revenues declined 4.7% on a per-day basis in the third quarter due to tough economic conditions, heightened competition, and some operational challenges. The company expects these pressures —especially the economic softness and pricing pressure from competitors — to persist through the rest of the year. These issues have forced LKQ to make price concessions in some markets, which could weigh on margins and limit growth in the region over the near term.
Gloomy outlook for 2025 raises concerns. In North America, a delayed recovery in repairable claims, tariff-related disruptions, and competitive pressures will impact performance. In Europe, persistent economic weakness, geopolitical uncertainty, and ongoing U.S. trade negotiations add to the challenges. As a result, LKQ now expects 2025 organic parts and services revenues to decline between 200 and 300 basis points.
Stocks to Consider
Some better-ranked stocks in the auto space are General Motors Company GM, OPENLANE, Inc. KAR and Garrett Motion Inc. GTX, each sporting a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for GM’s 2025 and 2026 EPS has improved 4 cents and 11 cents, respectively, in the past seven days.
The Zacks Consensus Estimate for KAR’s 2025 sales and earnings implies year-over-year growth of 9.4% and 48.2%, respectively. EPS estimates for 2025 and 2026 have improved 9 cents and 11 cents, respectively, in the past 30 days.
The Zacks Consensus Estimate for GTX’s 2025 sales and earnings implies year-over-year growth of 2.6% and 16.7%, respectively. EPS estimates for 2025 and 2026 have improved 11 cents and 25 cents, respectively, in the past 30 days.
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General Motors Company (GM): Free Stock Analysis Report LKQ Corporation (LKQ): Free Stock Analysis Report OPENLANE, Inc. (KAR): Free Stock Analysis Report Garrett Motion Inc. (GTX): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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