LKQ’s second quarter results for 2026 were met with a notably negative market reaction, with management citing operational disruptions in Europe as a key factor. CEO Justin Jude openly acknowledged that the company’s implementation of a new enterprise resource planning (ERP) system in Germany led to considerable service issues and revenue loss, while North American operations achieved positive organic growth for the first time in nine quarters. Jude characterized the ERP transition as “more challenging and taken longer to stabilize than planned,” but emphasized that underlying trends in North America and Specialty segments showed improvement. Management’s candid tone reflected a sense of accountability for the quarter’s underperformance, while also highlighting efforts to address the disruption and restore service levels in Europe.
Is now the time to buy LKQ? Find out in our full research report (it’s free for active Edge members).
LKQ (LKQ) Q2 CY2026 Highlights:
- Revenue: $3.41 billion vs analyst estimates of $3.49 billion (3% year-on-year decline, 2.3% miss)
- Adjusted EPS: $0.67 vs analyst expectations of $0.71 (6% miss)
- Adjusted EBITDA: $349 million vs analyst estimates of $363.1 million (10.2% margin, 3.9% miss)
- Management lowered its full-year Adjusted EPS guidance to $2.75 at the midpoint, a 9.8% decrease
- Operating Margin: 6.6%, down from 8.5% in the same quarter last year
- Organic Revenue fell 4.4% year on year (miss)
- Market Capitalization: $6.1 billion
While we enjoy listening to the management’s commentary, our favorite part of earnings calls is the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.
Our Top 5 Analyst Questions From LKQ’s Q2 Earnings Call
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Jeffrey Lick (Stephens Inc.) asked about the evolution of North American repairable claims and the margin impact from focusing on larger multi-shop operators. CEO Justin Jude highlighted improving claims trends and the benefit of MSOs adopting more alternative parts, which aids margins.
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Craig Kennison (Baird) questioned the risk of further ERP disruption in Europe as the system is rolled out to other countries. Jude clarified that no additional ERP conversions are planned for this year, and future rollouts should be less disruptive due to lessons learned in Germany.
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Jash Patwa (JPMorgan) inquired about the impact of tariff changes on segment profitability and the split between gross profit and customer pass-through. CFO Rick Galloway noted a 40% tariff reduction on Taiwanese imports, with most benefits expected to be passed through rather than retained as margin.
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John Babcock (Barclays) sought clarity on competitive dynamics in the U.K. and Benelux and the drivers of German ERP disruption. Jude explained that increased competition in the U.K. is pressuring margins, while technical and training issues caused the German revenue decline.
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Bret Jordan (Jefferies) probed whether Q2 represents the low point for European EBITDA margins and asked about margin headwinds in Specialty. Galloway indicated Q2 should be the low watermark, with Specialty margin pressured by a one-time credit loss now resolved.
Catalysts in Upcoming Quarters
Looking ahead, the StockStory team will be watching (1) the pace of service restoration and revenue recapture in Germany following the ERP rollout, (2) cost control effectiveness and commercial execution in the U.K. and Benelux in response to competitive pressures, and (3) continued progress in North American margin expansion through alternative part adoption and operational improvements. Additionally, we will monitor the outcome of LKQ’s ongoing strategic review and any potential divestitures or business model adjustments.
LKQ currently trades at $24.18, down from $26.39 just before the earnings. Is the company at an inflection point that warrants a buy or sell? Find out in our full research report (it’s free).
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