UPDATE: Raymond James Downgrades LKQ Corp. (LKQ) to Market Perform
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Raymond James analyst Samuel Darkatsh downgraded LKQ Corp. (NASDAQ: LKQ) from Outperform to Market Perform.
The analyst comments "Our prior reticence towards being more constructive was based on two factors that no longer seem to apply. First, LKQ's crisp execution has demonstrated not only an ability to get price in its core NP&S business but also retain profits from steel and precious metal inflation, thus increasingly becoming a true "inflation hedge". Second, the company's consistent performance in expanding European margins should alleviate concerns around the ongoing ERP conversion. Further, the FCF yield is attractive in the high single digits, with upside to FCF possible should likely European A/P extensions come to fruition. Finally, we remain encouraged that US weekly gasoline consumption trends continue to improve on a 2-year stack, as our "above consensus" model assumes flat/down sequential NP&S organic sales on a 2-year stack. Our enthusiasm is partially tempered by the very strong recent correlation between LKQ shares' relative performance and prevailing precious metals pricing, which raises potential volatility and may compress the long-term multiple if sustained."
Shares of LKQ Corp. closed at $50.75 yesterday.
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