LKQ Corp.'s North America segment returned to positive organic revenue growth for the first time in nine quarters during the second quarter of 2026. This is as alternative parts utilization climbed to a record high above 40%, the Antioch, Tennessee-based parts supplier said in its second-quarter earnings release published July 30.
North America parts and services organic revenue increased 0.5% in the quarter, and aftermarket collision revenue rose approximately 2%, Senior Vice President and Chief Financial Officer Rick Galloway said on the company's second-quarter earnings call. LKQ's Canadian hard parts business also grew in the mid-single digits, while paint remained the segment's main drag on volume, Galloway said.
In response to an analyst question, Galloway added that bumper-to-bumper sales also grew in the mid-single digits during the quarter. Galloway attributed the paint softness to paint often being the most discretionary line item shop customers cut from a repair.
Companywide, revenue fell 3% to $3.4 billion in the quarter, from $3.5 billion a year earlier, and net income dropped to $134 million from $185 million. Adjusted diluted earnings per share fell to $0.67 from $0.84.
Repairable claims and insurance trends support recovery
President and CEO Justin Jude said, "North America returned to positive organic growth for the first time in nine quarters" in the earnings release, pointing to a mix of demand indicators moving in the collision industry's favor.
On the earnings call, Jude said industry-wide repairable claims were down in a range of 1% to 3% for the quarter, an improvement from the prior quarter. He also pointed to two consecutive months of negative year-over-year insurance CPI readings in May and June, along with rising used-vehicle prices, as factors pushing insurance carriers to lean more heavily on alternative parts to hold down repair costs. Alternative parts utilization exceeded 40% for the quarter, surpassing the previous record LKQ set in the first quarter of 2026, Jude said.
MSOs capture more of the alternative parts business
Jude told analysts that in a still-depressed repair market, insurance carriers are steering more volume toward multi-shop operators. That’s because MSOs already use alternative parts at higher rates and tend to move vehicles through repairs faster than independent shops.
He added that the shift benefits LKQ's margins as well, since MSOs require less selling, general and administrative expense support per dollar of revenue than smaller, independent rooftops.
Taiwan tariff cut lowers costs on imported aftermarket parts
LKQ's cost of importing aftermarket collision parts eased during the quarter after the Section 232 tariff rate on automotive parts imported from Taiwan dropped from 25% to 15% effective May 1, Galloway said on the call, describing it as a 40% reduction in the tariff rate itself. Galloway said LKQ did not capture additional margin when it passed the earlier tariff increase through to customers. He said he is not modeling much margin benefit from the decrease either, as the company works to stay price-competitive while it turns through existing inventory in the back half of the year.
Europe disruption drags down full-year guidance
LKQ's companywide results were also affected by a slower-than-expected rollout of a new enterprise resource planning system in Germany. Galloway said on the earnings call that it reduced European revenue by approximately $140 million during the quarter.
As a result, LKQ lowered its full-year 2026 outlook: organic parts and services revenue is now expected to decline 1% to 3%, down from a prior range of a 0.5% decline to 1.5% growth. Adjusted diluted EPS guidance was cut to $2.60 to $2.90 from $2.90 to $3.20, according to the earnings release.
LKQ Corp. also said its board-led review of strategic alternatives, including a possible sale of the company or its Specialty segment, remains active. Bank of America and Goldman Sachs continue to advise on the process, Jude said on the call. The review has no deadline or definitive timetable, according to the earnings release.
The North America recovery follows similar signals in LKQ's first-quarter 2026 report, when alternative parts utilization first approached the 40% mark and repairable claims showed sequential improvement.
