ATB ATB Capital Markets analyst Chris Murray reduced his forecast for Boyd Group Services Inc.’s first half of 2025 ahead of the May 14 release of its first-quarter results in response to U.S. peer LKQ Corp.’s (financial results, expecting its recovery to be pushed later into the year than previously anticipated.
“One of the key comps for BYD is LKQ Corp. (LKQ-O, NR), which reported its Q1/25 results on April 24, 2025, missing estimates,” he said. “One of the ongoing negative drivers for LKQ and the broader industry including Boyd Group Services has been the fall in repairable claims. Originally thought to be only a weather-related issue with a highly unusual warm Q1/24 season, there is a broader thought that the fall is more tied to consumer behaviour resulting from significant (approximately 20-per-cent) increases in insurance premiums, which has led consumers to defer or avoid repairs to not further increase insurance costs as well as falling used car pricing, which increases the propensity for total losses. We believe similar trends are impacting Boyd, and we are reducing our expectations for H1/25, while still expecting a return to improved same-store growth and margin performance later this year.”
“LKQ had several relevant comments with its Q1/25 report that indicated that North American organic growth was down 4.1 per cent driven by an almost 10-per-cent reduction in repairable claims and having one less selling day (Q1/24 was a leap year). In their commentary, they indicated that they believed that repairable claims were normalizing, based on insurance data (consumers are switching as some of the highest reported rates and flattening insurance prices) and that a more meaningful improvement should be expected in H2/25.”
While Mr. Murray expects Boyd’s margins to benefit from its recently launched Project 360 transformation initiatives, which is aiming to generate $100-million in recurring annual cost savings and position it to grow adjusted EBITDA by a 15-per-cent annual growth rate, over the next five years by the second quarter of the year, he warned industry dynamics are likely to weigh more in the near term.
“We expect similar trends are likely to apply to Boyd, and we are reducing our expectation for same-store sales growth in Q1/25 and Q2/25,” he said. “When the Company reported Q4/24 results it indicated that it expected to see some improvement from the negative 2.6-per-cent Q4 sale store sales growth (SSSG) print, mainly on the improved year-over-year weather impact, however, we expect industry trends and the one less selling day are likely to keep Q1/25 results similar to the Q4 print, with margins negatively impacted by labour absorption and some early transformation costs. We have shifted our expectation for recovery, partly from normalizing insurance conditions and also from the easier year-over-year comparatives into H2/25.”
With reductions to his 2025 and 2026 earnings and same-store sales growth projections, Mr. Murray cut his target for Boyd shares to $295 from $320, maintaining an “outperform” rating. The average is $265.62.