Automotive parts company LKQ (NASDAQ:LKQ) missed Wall Street's revenue expectations in Q3 2026, with revenue falling 5.1% year on year to $3.32 billion. Its non-GAAP profit of $0.50 per share was 6.5% below analysts' consensus estimates.
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LKQ (LKQ) Q3 2026 highlights:
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Revenue$3.32 billion vs S&P analysts' consensus estimates of $3.37 billion (5.1% year-on-year decline, 1.6% miss)
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Adjusted EPS$0.50 vs S&P analysts' consensus estimates of $0.53 (6.5% miss)
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Operating margin1.6%, down from 7.8% in the same quarter last year
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Free cash flow margin11.2%, similar to the same quarter last year
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Organic revenuefell 5% year on year (miss)
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Market capitalization$4.35 billion
Commenting on the third quarter, John Mendel, Chairman of the Board of LKQ, said: "LKQ remains a fundamentally strong enterprise, supported by its scale, leading positions across key markets, and global distribution platform. At the same time, our recent financial and operating performance has not reflected the strength of the business or met the standards we expect, particularly in Europe. The Board has been deeply engaged in addressing these challenges, and the appointment of a new CEO, leadership changes in Europe, and the engagement of Alvarez & Marsal are important steps in a broader effort to improve execution and financial performance. We believe LKQ has significant strengths that are not currently reflected in its operating performance, and our focus is on translating those strengths into improved performance and increased value for our shareholders."
Revenue growth
Examining a company's long-term performance can provide clues about its quality. Any business can deliver a good quarter or two, but many enduring ones grow for years. LKQ struggled to consistently increase demand as its $13.51 billion in revenue for the trailing 12 months was close to its revenue five years ago. That underwhelming result is a sign of poor business quality.
Long-term growth is the most important, but within consumer discretionary, product cycles are short and revenue can be hit-driven due to rapidly changing trends and consumer preferences. LKQ's recent performance shows its demand remained suppressed as its revenue has declined by 2.7% annually over the last two years.
LKQ also reports organic revenue, which strips out one-time events like acquisitions and currency fluctuations that don't accurately reflect its fundamentals. Over the last two years, LKQ's organic revenue averaged 2.9% year-on-year declines. This was in line with its two-year revenue growth, indicating that core operations, rather than acquisitions and divestitures, drove most of its results.
This quarter, LKQ missed Wall Street's consensus estimates and reported an uninspiring 5.1% year-on-year revenue decline, generating $3.32 billion of revenue.
Looking ahead, sell-side analysts expect revenue to grow 1.2% over the next 12 months, according to S&P. Although this projection suggests its newer products and services will drive better revenue performance, it is still below the sector average.
Operating margin
Operating margin is an important measure of profitability as it shows the portion of revenue left after accounting for all core expenses, from the cost of goods sold to advertising and wages. It's also useful for comparing profitability across companies with different levels of debt and tax rates because it excludes interest and taxes.
LKQ's operating margin has shrunk over the last 12 months and averaged 6.4% over the last two years. The company's profitability was mediocre for a consumer discretionary business and shows it couldn't pass its higher operating expenses on to its customers.
In Q3, LKQ generated an operating margin of 1.6%, down 6.2 percentage points year on year. This contraction shows it was less efficient because its expenses increased relative to its revenue.
Earnings per share
Revenue trends explain a company's historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its revenue through excessive spending on advertising and promotions.
LKQ's EPS declined by 8.5% annually over the last five years while its revenue was flat. The company struggled because its fixed cost base made it difficult to adjust to choppy demand.
In Q3, LKQ reported adjusted EPS of $0.50, down from $0.84 in the same quarter last year. This result missed analysts' consensus estimates. Over the next 12 months, Wall Street expects LKQ's full-year EPS to stay about the same, moving from $2.43 to $2.44, according to S&P.
Key takeaways from LKQ's Q3 results
LKQ's revenue and EPS both missed Wall Street's consensus estimates, leaving few positives in a weaker quarter. However, expectations may have been low as shares rose 3.6% to $17.81 immediately after the weak results.
When deciding whether to invest in this stock, the latest quarter matters, but not as much as longer-term business quality and valuation. Read the free full research report here .
