The company, citing a challenging environment, says it is working to reduce costs and streamline operations while taking market share to position itself for success as the environment improves.
By DeAnne Toto, Editorial Director
Recycled and aftermarket automotive parts provider LKQ Corp., headquartered in Antioch, Tennessee, has revised its outlook as it pertains to earnings per share (EPS) for the whole of 2026 based on the challenging market.
The company reported first-quarter 2026 financial results that include $3,469 million in revenue, an increase of 4.3 percent compared with $3,327 million for the first quarter of 2025.
The company says total parts and services revenue increased 3.6 percent, which included a 5.1 percent increase from foreign exchange rates year over year, a 1.6 percent decrease in parts and services organic revenue, and the net impact of acquisitions and divestitures, which increased revenue by 0.2 percent.
Net income was $77 million compared with $158 million for the same period of 2025, while diluted earnings per share were 30 cents compared with 61 cents for the same period of 2025, a decrease of 50.8 percent. Net income for the three months ended March 31 included a $44 million (or 17-cent) impairment of the company’s equity method investment in Mekonomen, the Nordic spare parts provider that LKQ invested in in 2016.
On an adjusted basis, net income totaled $171 million in the quarter compared with $193 million for the same period in 2025, while adjusted diluted EPS totaled 67 cents compared with 74 cents, a decrease of 9.5 percent.
“We are operating in a challenging environment and are focused on improving our results,” says LKQ President and CEO Justin Jude in the news release accompanying the company’s earnings. “Our teams are taking deliberate actions to reduce costs [and] streamline operations while taking market share and position ourselves for success going forward as the environment improves.”
He continues, “In North America, our business held up well in the quarter with above-market growth, and we’re starting to see signs of recovery in the market."
In the company’s first quarter earnings call, Jude added, "These results highlight a gradual recovery and reinforce our confidence in the direction of our North American operations. Repairable claims are down approximately 2 percent-4 percent, demonstrating steady recovery from the levels we saw throughout 2025. Importantly, we achieved strong performance in our aftermarket collision product line, surpassing the growth levels of the segment. This positive momentum was partly driven by an increase in the utilization of alternative parts, which reached a record high of nearly 40 percent through February, and we anticipate that this favorable trend continues in March as well."
Jude also points to "continual improvements through the quarter" in Europe as the company continues to work on integration.
Jude says in early April, LKQ progressed an enterprise resource planning, or ERP, migration in a major market that is part of the company’s overall operational improvement initiatives.
In the conference call, he expanded on the ERP migration, saying, "We anticipated temporary sales disruption associated with the conversion and appropriately reflected that in our full year guidance. The project is progressing ahead of our initial expectations, and while we are not yet fully optimized postconversion, our priority is maintaining customer service, and we are seeing daily improvements in sales levels."
He added, "ERP conversions are intensive projects, but we approached it with deliberate execution. This achievement supports our integration road map and enables future process standardization, cost-reduction initiatives and enhancing the ability to become a seamless Pan-European distributor."
In the news release, Jude says the company as more work to do. "We are operating with urgency and focused on execution, improving our customer relationships and strengthening the business to create value for our shareholders.”
In late January, LKQ said its board of directors initiated a comprehensive review of strategic alternatives to enhance shareholder value, having retained BofA Securities and Goldman Sachs & Co. LLC. as its financial advisors. The review has no deadline or definitive timetable and there can be no assurance that it will result in any transaction or other strategic outcome, according to the company.
Cash flow from operations and free cash flow were negative $56 million and negative $96 million, respectively, for the first quarter of 2026. As of March 31, 2026, the balance sheet reflected total debt of $3.9 billion and total leverage, as defined in our credit facility, was 2.6x EBITDA, or earnings before interest, taxes, depreciation and amortization.
“We are seeing improving performance trends across our global footprint, with continued strength in North America and early signs of stabilization in Europe,” says Rick Galloway, senior vice president and chief financial officer. “We are continuing to implement productivity and restructuring initiatives intended to help mitigate the impact of ongoing macroeconomic and cost pressures. Based on our performance to date, we remain focused on executing against our full-year 2026 outlook.”
That outlook includes organic revenue growth for parts and services ranging from (0.5)-1.5 percent; diluted EPS of $2.16-$2.46, revised from $2.35-$2.65; adjusted diluted EPS of $2.90-$3.20; operating cash flow of $900-$1,100 million; and free cash flow of $700-$850 million.
In the earnings call, Jude said, "Used car prices are climbing, noncomprehensive total loss rates are declining and auto insurance premiums are easing, all positive indicators for our industry. Notably, used car values improved every month this quarter, with March alone up 6.2 percent. These trends will drive a reduction in total loss frequency and boost the proportion of accidents that translate into repairable claims, supporting continued growth and opportunity for our company. While we can’t predict the exact timing of a broader recovery, the indicators are moving in a direction that supports our model."