This week’s Stock of the Week is the best at what it does and is working hard to stay that way.
Repair and Restore
LKQ Corporation (LKQ) provides the auto-insurance industry with parts that are of “like kind and quality” compared with original-equipment parts to be used in repairs—hence its name.
The stock has been affected by concerns about auto sales, but that is the wrong way to look at LKQ, which is essentially a logistics company that happens to be in the automotive sector. It has superior technology that helps insurers and their repair shops locate needed parts faster than anyone else can at prices at least 25% lower than the cost of manufacturers’ original-equipment parts.
LKQ has grown through multiple acquisitions of the number-one and number-two firms in many geographical markets and is now focused on absorbing those pieces—notably Stahlgruber GmbH of Germany, a leading European wholesaler of aftermarket spare parts, for which LKQ paid $1.8 billion last year. LKQ is also paying down the debt it took on in its acquisitions and has approved a $500 million share repurchase program. Revenue was $9.7 billion in 2017 and will likely be reported as $11.9 billion for 2018 and $13.1 billion next year.
Fiscal year: December. Earnings per share: 2019 est./$2.50…2018 est./$1.92…2017/$1.72.
St. Denis J. “Sandy” Villere III is partner and portfolio manager at Villere & Company, LLC, New Orleans, which manages $2 billion, including the $233 million Villere Balanced Fund (VILLX). Villere.com