Research firm Stifel published a research report Thursday, April 24th, previewing auto parts supplier LKQ Corporation (NASDAQ:LKQ)’s upcoming earnings report. Stifel analyst James Albertine says he expects the focus of the company in next week’s earnings report (4/29) to be on the outlook for organic growth and more details on the flow-through from Sator and Keystone Auto acquisitions.

Two positive trends Albertine points to longer term for LKQ Corporation (NASDAQ:LKQ) are the “aging vehicle part” (LKQ average part up to 9 years from 7.2) and the recent boom in auto sales. In regard to the latter he notes that these are, “vehicles that are predominantly covered by OEM warranties”.

Stifel rates LKQ Corporation (NASDAQ:LKQ) a Buy, and places a $39 price target on the stock.

LKQ Corporation

LKQ Corporation’s Q1 2014 EPS estimate

Albertine projects that LKQ Corporation (NASDAQ:LKQ) will report earnings per share of $.34 in the first quarter. He breaks down his model below. “We are modeling P&S sales growth of +30.9% y/y (driven by +25.0% y/y acquisition growth, +6.0% y/y organic growth), and other sales growth +4.9% y/y (driven by +10.0% y/y acquisition growth, -5% y/y organic growth). We are modeling GM of 41.5% (-45 bp y/y), SG&A -10 bp y/y to 11.4% of sales, facility and warehouse expense up +10 bp y/y to 8.5% of sales, and distribution expense -20 bp y/y to 8.5% of sales.”

Company developments

The Stifel report also highlights a number of company developments that Albertine sees as positive catalysts over the next few quarters. He first focuses on the recent acquisition of “distributors/jobbers in Western Europe”, and points out how this is a big step in the “transition to a two-step model”. He also argues that the technology-related productivity gains are likely (especially in North America) from the ongoing CCC Information Services program integration.

Albertine expects organic growth in the UK to accelerate in the second half of 2014 as more new stores are added to the comp base. He also highlighted the possibility of value-adding M&A activity over the next year or so. “We expect LKQ has further NA opportunities for (a) smaller tuck-in acquisitions to build scale in existing markets and (b) further vertical integration, among other much longer-term distribution/ancillary market endeavors.”