LKQ Lowers Full-Year Guidance as Revenue Slips
The automotive parts distributor lowered its full-year adjusted diluted EPS guidance to a range of $2.60 to $2.90.
LKQ (LKQ), the automotive parts distributor, reported a 3.0% decrease in second-quarter revenue to $3.4 billion.
While the company saw a return to positive organic growth in North America for the first time in nine quarters, the result was offset by broader declines in parts and services. Organic revenue for that segment decreased 5.1% year-over-year, a deterioration from the 1.6% decrease recorded in the first quarter.
Operating income fell 24.7% year-over-year to $225 million, down from $299 million in the same period last year. Profitability compressed across all major business lines. The segment EBITDA margin for North America fell to 14.1% from 15.5%, while the Specialty segment margin dropped to 6.7% from 8.5%. In Europe, the margin compressed to 7.5% from 9.4% due to an ERP implementation in Germany.
Cash flow metrics improved sequentially. Cash flow from operations rose to $111 million in the second quarter, compared to negative $56 million in the first quarter. Free cash flow similarly improved to $60 million from a negative $96 million in the prior quarter.
Management lowered its full-year 2026 outlook across several key metrics. The company now expects organic revenue growth for parts and services to range between negative 3.0% and negative 1.0%, down from a previous guide of negative 0.5% to 1.5%. Diluted EPS guidance was reduced to $1.78 to $2.08 from $2.16 to $2.46, and adjusted diluted EPS guidance was lowered to $2.60 to $2.90 from $2.90 to $3.20.
Cash flow projections for the year were also revised downward. Operating cash flow guidance is now $825 million to $1.025 billion, compared to the previous range of $900 million to $1.1 billion. Free cash flow guidance was lowered to $625 million to $775 million from $700 million to $850 million.
LKQ is currently conducting a strategic review initiated in January 2026. As part of this process, the company is evaluating a potential sale of its Specialty segment, a process it first announced in December 2025.