LKQ Corporation: A Contrarian Bet Amid Strategic Shifts

The automotive parts distributor LKQ Corporation finds itself at a pivotal juncture. After significantly underperforming the broader market last year and losing its coveted spot in the S&P 500 index, the company is now attracting attention from value-focused institutions. The central question for investors is whether a newly launched strategic overhaul can reverse the stock's downward trajectory.

Management is actively implementing changes to address recent operational headwinds. The current landscape is defined by several key financial and strategic factors:

• Valuation Metrics: The stock appears comparatively inexpensive within its sector, trading at a forward price-to-earnings (P/E) ratio of approximately 10.3 and offering a dividend yield exceeding 3.6%.
• Performance Pressures: Organic sales growth has contracted, declining by an average of 2.1% annually over the past two years, while return on invested capital (ROIC) has also trended lower.
• Financial Leverage: The company's net debt stands at roughly $3.76 billion, which represents 2.3 times its EBITDA.

A major component of the turnaround plan involves simplifying the business structure. LKQ has initiated a process to sell its Specialty segment, along with NTP-STAG, its distributor of recreational vehicle accessories. This divestiture process, launched in December 2025, is now entering a critical phase, aiming to strengthen the balance sheet and reduce corporate complexity.

Should investors sell immediately? Or is it worth buying LKQ?

Institutional Investor Sees Opportunity

Recent filings with the U.S. Securities and Exchange Commission (SEC) reveal that one investment firm is betting on a recovery. Seizert Capital Partners significantly increased its stake during the fourth quarter of 2025, purchasing approximately 504,000 additional LKQ shares. This move brings its total holdings to nearly 2.2 million shares, signaling a vote of confidence in the company's fundamental potential despite a share price decline of 20.8% over the past year.

This accumulation is notable given the diminished investor sentiment following LKQ's removal from the S&P 500 in December, an event that eliminated automatic buying pressure from index-tracking funds. The action by Seizert suggests that some contrarian, value-oriented investors view the current market pessimism as a potential entry point.

The 2026 Catalyst

The success of LKQ's strategic review will likely determine its performance in the coming year. The first half of 2026 is expected to yield concrete results from the ongoing evaluation. Should the planned asset sales be executed successfully, the generated capital would provide management with options to either accelerate debt reduction or return funds to shareholders through enhanced distributions.

• Current Share Price: €28.20
• 52-Week High: €40.80 (February 28, 2025)
• 12-Month Performance: -20.79%