LKQ Q2 Deep Dive: ERP Challenges and European Weakness Drive Downward Guidance Revision
Automotive parts company LKQ (NASDAQ:LKQ) fell short of the market’s revenue expectations in Q2 CY2026, with sales falling 3% year on year to $3.41 billion. Its non-GAAP profit of $0.67 per share was 6% below analysts’ consensus estimates.
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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: $5.73 billion
StockStory’s Take
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.
Looking forward, LKQ’s updated full-year guidance is shaped largely by uncertainty around the pace of European recovery, particularly in Germany, and continued margin pressures in the U.K. and Benelux. CFO Rick Galloway explained that revised expectations assume only modest improvements in Europe for the remainder of the year and do not factor in significant market rebounds. Management is focusing on restoring service in Germany, enhancing commercial execution, and maintaining cost discipline as priorities, while also noting that no further ERP rollouts are planned for the rest of the year. Jude stated, “Our revised outlook assumes continued improvement in service levels and revenue in the affected German operations during the second half but at a more measured pace than we previously expected.”
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