Your Source for Up-To-Date News and Research on the Collision Repair Industry 

 

click here to subscribe to the FREE INSIGHT Editor's Desk News Alert Email

SUBSCRIBERS-ONLY
Today's News
INSIGHT This Month
INSIGHT Archives
Survey Center
Letter to the Editor

Business Tools
Subscription Information
CSI Reporting
Financial Analysis
IRS Audit Guide

Management/
Technical Info
Market Watch Rates
INSIGHT Inside this month's issue...

Feedback
Letter to the Editor

The Groundhog's Key

It’s February 1st and the earnings reports for the last quarter of 2006 are in for many of the Collision Repair Industry stocks that we follow.

Strong reported earnings growth at Keystone Automotive Industries for the quarter ending September 29, 2006 appears to have offset much in the drop of value of this stock ($39 to $31) after the patent case filed against Keystone by Ford Motor was ruled in favor of Ford in December. Keystone sales for the quarter ending September 29 were up 15 percent overall compared to the same quarter in 2005, and were up 11 percent for same store sales for the same quarter to quarter comparison.

Keystone’s overall gross profit for the period was down slightly from 44.2 percent to 43.6 percent. Interestingly, automotive crash related sheet metal parts showed a 20 percent increase. Bumpers were up 14 percent, and paint and related materials were up only four percent.

Sales results for both Keystone and LKQ Corporation would indicate that, in a relatively flat market for collision repair, both aftermarket and salvage have shown market share growth as a result of increasing pressure by many insurers to see that estimates written by their DRP shops specify aftermarket or salvage when available.

Our field work would indicate that the combination of aftermarket and salvage for many insurers is 20 percent of their parts replacement cost.

While the chart on the opposite page shows a 13 percent drop for the month in the price of LKQ stock, at the date this is written (on Groundhog Day’s Eve) much of that drop ($2.53) has been recovered. It is my belief that in 2007 we will see an increasing use of salvage, and perhaps a slight cutback in the specification/usage of aftermarket sheet metal.

On the insurer side of the market key publicly held insurers, such as Allstate, Progressive, St. Paul Travelers, and Safeco, were down slightly. Based on the price earnings ratio, which is below 12 for all of these companies, we may see some breakout upswing in the value of these stocks as the year moves forward. Hurricane season was not a big expense this year. This, coupled with increasing pressure to bring down both the cost of repairing people (BI claims) and repairing vehicles, may result in improved earnings.

With the exception of BASF, all of the major suppliers of refinish materials saw the value of their securities rise in January. While for each of these, DuPont, Sherwin-Williams, Akzo Nobel, PPG, and Valspar, automotive is a small percentage of their overall sales, historically it has been an important source of corporate profits.

On the repairer side, our only publicly held company, Boyd, showed a surprising rebound in what had been in 2006 a long and precipitous slide downward. Boyd Income Group Fund stock rose almost 16 percent in January. If inclement driving conditions continue to hold forth in key areas for Boyd, such as Chicago and western Canada, Boyd’s earnings have a good chance of rebounding in 2007.

It’s too early in the year to see just where the overall Market is headed. Domestic vehicle manufacturers are not showing sales gains, housing is flat to down, while retail appears to be a remaining bright light.

-Charles Baker-

Feedback

Have a comment about this article? Send Email to Charles Baker, INSIGHT's Publisher

©2007 Collision Repair Industry INSIGHT
All Rights Reserved

FEATURED
LINKS:

INSIGHT Supports the NABC!
Do You?