What happened
Shares of LKQ (LKQ 0.29%), a global distributor of automotive replacement parts, components, and systems with operations in North America, Europe, and Taiwan, are down 17% as of 11:45 a.m. EDT after the company posted a worse-than-expected first quarter thanks to rising costs.
So what
LKQ's top line managed to perform well with revenue jumping 16% to $2.72 billion, compared to the prior year, with 3.7% organic revenue growth for parts and services -- that topped Wall Street estimates calling for $2.63 billion. The healthy top-line growth didn't trickle down to the bottom line with adjusted earnings per share checking in at $0.55 per share, lower than analysts' estimates calling for $0.59 per share.
LKQ President and Chief Executive Officer Dominick Zarcone said this in a press release:
I am very pleased with the 6.5% organic parts and services growth in our North America segment. Although we faced a few revenue headwinds in Europe and our Specialty business and experienced certain near-term cost pressures in the quarter, we are actively addressing the issues and I am confident that we have solid plans to quickly return to our historical levels of growth and profitability.
Image source: Getty Images.
Now what
Revenue headwinds in Europe and rising costs forced management to cut its guidance for 2018. Organic revenue growth is now expected to check in between 4% to 5.5% for the full year, lower than the original range of 4% to 6% and adjusted EPS was lowered $0.10 at each end of the range to between $2.20 and $2.30 per share. Management has its challenges ahead to offset rising raw material costs and get its business back firing on all cylinders.
