Some May Be Optimistic About LKQ's (NASDAQ:LKQ) Earnings

The market was pleased with the recent earnings report from LKQ Corporation (NASDAQ:LKQ), despite the profit numbers being soft. However, we think the company is showing some signs that things are more promising than they seem.

View our latest analysis for LKQ

How Do Unusual Items Influence Profit?

Importantly, our data indicates that LKQ's profit was reduced by US$150m, due to unusual items, over the last year. While deductions due to unusual items are disappointing in the first instance, there is a silver lining. When we analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. And that's hardly a surprise given these line items are considered unusual. Assuming those unusual expenses don't come up again, we'd therefore expect LKQ to produce a higher profit next year, all else being equal.

That might leave you wondering what analysts are forecasting in terms of future profitability. Luckily, you can click here to see an interactive graph depicting future profitability, based on their estimates.

Our Take On LKQ's Profit Performance

Unusual items (expenses) detracted from LKQ's earnings over the last year, but we might see an improvement next year. Because of this, we think LKQ's earnings potential is at least as good as it seems, and maybe even better! On the other hand, its EPS actually shrunk in the last twelve months. Of course, we've only just scratched the surface when it comes to analysing its earnings; one could also consider margins, forecast growth, and return on investment, among other factors. If you'd like to know more about LKQ as a business, it's important to be aware of any risks it's facing. Every company has risks, and we've spotted 2 warning signs for LKQ you should know about.

Today we've zoomed in on a single data point to better understand the nature of LKQ's profit. But there are plenty of other ways to inform your opinion of a company. For example, many people consider a high return on equity as an indication of favorable business economics, while others like to 'follow the money' and search out stocks that insiders are buying. While it might take a little research on your behalf, you may find this free collection of companies boasting high return on equity, or this list of stocks with significant insider holdings to be useful.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.