Automotive parts supplier LKQ (NASDAQ:LKQ) has had a rough year, underperforming the S&P 500 by a good 15 percentage points over the past 12 months. It's lucky for shareholders, then, that a white knight is riding to their rescue this morning -- and helping to lift LKQ stock by 10.4% as of 12:50 p.m. EDT.
Who is said chevalier? According to a Schedule 13D filing with the Securities and Exchange Commission this morning, it's activist investor Jeffrey Ubben's ValueAct Capital, which disclosed today that it's purchased some 16 million shares of LKQ to take a 5.2% stake in the company. It hopes to parlay that into an ability to strategize with LKQ management about improving the company's capital allocation and mergers and acquisitions (M&A) strategy.
Investors appear to like this vote of confidence by ValueAct, especially coming as it does less than two months after LKQ reported weaker than expected Q2 sales, and warned that organic sales growth this year will be almost nonexistent -- 2% at most, and potentially as little as just 0.5%.
LKQ also reduced pro forma profit guidance for the year, putting its new range at somewhere between $2.30 and $2.38 per share -- causing analysts to shave $0.04 per share off their forecasts. The fact that ValueAct sees the stock as worth buying in the face of such news was surely a welcome development.
Furthermore, LKQ itself appears to welcome ValueAct's investment, and issued a statement today saying it "appreciate[s] constructive input," wants to "improve operational performance," and is "confident in our ability to execute."
Working together, maybe ValueAct and LKQ can make that happen.