LKQ CORP (LKQ) Q3 2025 Earnings Summary

Executive Summary

Q3 2025 delivered mixed headline results: adjusted EPS of $0.84, up vs consensus*, but revenue of $3.50B was slightly below consensus*; management raised the FY25 adjusted EPS midpoint and narrowed the range following Self Service divestiture .
Organic parts & services declined 1.2% YoY (FX +2.6%, M&A -0.3%); North America outperformed repairable claims with organic revenue per-day down just 30 bps against a ~6% decline in claims; Specialty posted +9.4% organic growth, and Europe achieved double‑digit EBITDA margins (10%) despite lower volumes .
Strong FCF of $387M in the quarter (CFO $440M) supported $118M returned to shareholders; leverage at 2.5x with $4.2B total debt; a further $390M debt paydown occurred Oct 1 post Self Service sale .
FY25 outlook: adjusted EPS range tightened to $3.00–$3.15 (midpoint +$0.07 vs prior after adjusting for divestiture impact); FCF raised to $600–$750M; organic parts & services revenue range narrowed to (3.0)%–(2.0)% .
Stock reaction catalysts: an EPS beat vs Street*, cleaner portfolio post-divestiture, improving Europe margins, and Specialty growth may be offset by revenue softness and tariff/mix headwinds .

What Went Well and What Went Wrong

What Went Well

Europe margin resilience and sequential improvement: segment EBITDA margin at 10% (flat YoY, +60 bps QoQ) as SKU rationalization and portfolio actions take hold; leadership changes continue to drive transformation .
Specialty inflection: +9.4% organic revenue growth, first positive organic growth in 14 quarters, attributed to targeted pricing and stronger channel relationships .
Capital and cash discipline: Q3 free cash flow $387M; $118M returned to shareholders ($40M buybacks; $78M dividends); total leverage 2.5x; post-quarter $390M debt repaid using Self Service proceeds .
Management tone/quote: “We delivered on our commitment to simplify the business with the divestiture of Self Service… bounced back with double digit margins in Europe and achieved more than 9% organic growth in our Specialty business, all while driving solid free cash flow.” — Justin Jude, CEO .

What Went Wrong

Margins in North America compressed: Segment EBITDA margin fell to 14.0% (−180 bps YoY), with ~70 bps gross margin dilution from tariff pass‑through and unfavorable mix as MSO share grows; overhead deleverage also weighed ~80 bps .
Top-line softness vs prior year and estimates: Q3 revenue increased only 1.3% YoY to $3.499B and lagged consensus*, while parts & services organic revenue declined 1.2% YoY .
Tariffs remain a headwind: management passed through tariffs “dollar for dollar,” generating ~$35M of pricing but diluting gross margin; year‑end inventory expected to reflect a full turn inclusive of tariffs .

Financial Results

Headline Actuals – Quarterly Trend (oldest → newest)

Metric	Q3 2024	Q1 2025	Q2 2025	Q3 2025
Revenue ($USD Millions)	$3,453	$3,463	$3,642	$3,499
Diluted EPS (GAAP)	$0.70	$0.65	$0.75	$0.69
Adjusted Diluted EPS (Non‑GAAP)	$0.86	$0.79	$0.87	$0.84
Gross Margin %	38.7%	39.8%	38.8%	38.3%
Operating Margin %	8.7%	8.3%	8.6%	7.8%
Adjusted EBITDA ($USD Millions)	$402	$392	$423	$381

Q3 2025: Actual vs S&P Global Consensus

Metric	Q3 2025 Actual	Q3 2025 Consensus*	Surprise
Revenue ($USD Billions)	$3.499	$3.536*	−$0.037B (−1.0%)*
Adjusted EPS ($)	$0.84	$0.757*	+$0.083 (+11.0%)*
EBITDA/Adjusted EBITDA ($USD Millions)	$381	$374*	+$7 (+2.0%)*
# of Revenue Estimates	—	6*	—
# of EPS Estimates	—	7*	—

Values marked with * retrieved from S&P Global.

Segment Breakdown (Q3 2025 vs Q3 2024)

Segment	Revenue Q3’24 ($M)	Revenue Q3’25 ($M)	YoY %	Segment EBITDA Q3’24 ($M)	Margin % Q3’24	Segment EBITDA Q3’25 ($M)	Margin % Q3’25
Wholesale – North America	$1,423	$1,423	0.0%	$224	15.8%	$199	14.0%
Europe	$1,613	$1,620	+0.4%	$165	10.2%	$162	10.0%
Specialty	$419	$457	+9.1%	$31	7.3%	$34	7.3%
Total	$3,453	$3,499	+1.3%	$420	12.2%	$395	11.3%

KPIs and Cash/Capital

KPI (Quarter)	Q2 2025	Q3 2025
Cash from Operations ($M)	$296	$440
Free Cash Flow ($M)	$243	$387
Total Debt ($B)	$4.5	$4.2
Leverage (x EBITDA)	2.6x	2.5x
Share Repurchases ($M)	$39	$40
Dividends Paid ($M)	$78	$78
NA Organic Rev (per-day)	—	−0.3 pts; claims ~−6%
Europe Organic Rev (per-day)	—	−4.7%
Specialty Organic Rev	—	+9.4%

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Organic revenue growth (parts & services)	FY 2025	(3.5)% to (1.5)%	(3.0)% to (2.0)%	Narrowed/improved low end
Diluted EPS (GAAP)	FY 2025	$2.32 to $2.62	$2.47 to $2.62	Low end raised
Adjusted Diluted EPS	FY 2025	$2.85 to $3.15 (revised for Self Service)	$3.00 to $3.15	Midpoint +$0.07; narrowed
Operating Cash Flow	FY 2025	$0.80 to $1.00B	$0.825 to $1.025B	Raised
Free Cash Flow	FY 2025	$0.525 to $0.675B	$0.60 to $0.75B	Raised
Dividend	Next Payment	—	$0.30 per share (payable Dec 4, 2025; record Nov 20)	Declared

Management noted the revised guidance reflects removal of Self Service (~$0.15 EPS) and better‑than‑expected Q3 performance; the adjusted EPS midpoint moved from $3.00 (post‑divestiture basis) to $3.07 .

Earnings Call Themes & Trends

Topic	Previous Mentions (Q1 & Q2 2025)	Current Period (Q3 2025)	Trend
Tariffs/Macro	Q1: Formed tariff task force; outlook excluded tariff impacts . Q2: Lowered FY outlook; tariff uncertainty persists .	Tariff costs passed through “dollar for dollar,” ~$35M pricing; margin dilution continues; year‑end inventory to include full tariff turn .	Ongoing headwind, better managed but dilutive
Repairable claims/Insurance	Q2: NA outperformed with claims down ~9% .	NA organic per-day −30 bps vs claims ~−6%; service levels maintained; MSOs taking share .	Claims pressure moderating; share gains offset volume
Europe transformation	Q2: 25% leadership refresh; SKU rationalization; salvage partnership .	Segment EBITDA margin 10%; +60 bps sequential; >80% of product revenue reviewed for SKU actions .	Gradual operational improvement
Specialty segment	Q1: −6.8% YoY revenue . Q2: −0.4% YoY .	+9.4% organic growth; cost control held margins .	Inflecting positive
Technology/platform	—	Common operating platform rollout in Europe; go‑live early 2026 to cover ~30% of EU revenue .	Execution phase
Capital allocation/leverage	Q1/Q2: Buybacks + dividends; leverage ~2.5–2.6x .	$118M returned; leverage 2.5x; $390M post‑quarter debt paydown; target ~2x over time .	Deleveraging with balanced returns
ESG/Sustainability	—	Rooftop solar PPA in Germany; ~2.7 GWh/yr generation, up to 1,000 tCO2e/yr savings at Sulzbach‑Rosenberg .	Incremental progress

Management Commentary

“We delivered on our commitment to simplify the business with the divestiture of Self Service… gained market share in North America, bounced back with double digit margins in Europe and achieved more than 9% organic growth in our Specialty business, all while driving solid free cash flow.” — Justin Jude, CEO .
“Following the Self Service divestiture, we have reduced our debt by more than $600 million since the end of the second quarter… further fortifying our balance sheet.” — Rick Galloway, CFO .
“Wholesale North America posted a segment EBITDA margin of 14.0%… decline driven by dilutive tariff pass‑through and customer mix; overhead expenses were ~80 bps higher.” — Rick Galloway, CFO .
“We are on track to go live in early 2026 within a major market [in Europe], which will put approximately 30% of our European revenue on a common system.” — Justin Jude, CEO .

Q&A Highlights

Europe competitive landscape and revenue mix: Demand softness and consumer sentiment, with LKQ walking away from some low‑margin revenue; confidence in transformation under new leadership .
Alternative parts utilization/total loss: APU and total loss rates were sequentially flat; used‑car price volatility remains a limiter on total loss improvement .
Price vs volume dynamics: ~$35M in pricing from tariffs; tariffs are passed through dollar‑for‑dollar with no margin gain; volume remains down; growing with MSOs as they gain share .
Capital allocation and leverage: Ended quarter at 2.5x; repaid $390M on Oct 1; longer‑term goal ~2x leverage, which could allow greater emphasis on buybacks over time .

Estimates Context

Q3 2025 vs S&P Global consensus: Adjusted EPS $0.84 beat $0.76*; Revenue $3.499B missed $3.536B*; EBITDA/Adjusted EBITDA $381M beat $374M* .
FY25 implications: Raised adjusted EPS midpoint to $3.07 from $3.00 (after divestiture adjustment), narrowed range; FCF range raised despite ~$75M FCF headwind from divestiture taxes and lost Q4 EBITDA, mitigated by ~$50M capex cuts and ~$25M working capital improvement .
Values marked with * retrieved from S&P Global.

Key Takeaways for Investors

EPS quality over revenue: Despite a slight revenue miss vs Street*, disciplined cost control and tax benefits helped deliver an adjusted EPS beat and higher FY midpoint .
North America margin pressure persists near‑term from tariff pass‑through and MSO mix; watch for stabilization in repairable claims as a catalyst for margin recovery .
Europe is steadily improving under new leadership with SKU rationalization and systems consolidation; sustaining 10% EBITDA margins in a soft market is encouraging .
Specialty’s positive inflection (+9.4% organic) could support mix and growth into 2026 if sustained .
Balance sheet flexibility increasing: leverage trending lower (2.5x) with further debt paydown post‑quarter; capital returns remain active ($118M in Q3) .
Near‑term watch items: tariff flow‑through and gross margin dilution, per‑day volumes in NA/EU, execution on European platform rollout, and holiday‑season Specialty demand .
Guidance credibility improved with narrowed ranges and raised midpoint; continued FCF strength underpins dividend ($0.30 declared) and buybacks .

Additional References and Data Tables:

Consolidated income statement details and YoY bridges .
Revenue composition and organic/FX/M&A attribution .
Segment revenue and EBITDA with reconciliations .
Cash flow and FCF reconciliations .
Self Service divestiture completion (Oct 1) and discontinued operations treatment .