Narrow-moat rated LKQ LKQ reported first-quarter 2013 earnings per share before special items of $0.28, one penny shy of the Street consensus but up $0.03 on a comparable basis from the same period last year. The company reported record revenue of $1.2 billion, up 15.9% from the first quarter of 2012.

LKQ also reported that on April 23, it agreed to acquire Sator Beheer, a market leader in automotive aftermarket parts distribution in the Netherlands, Belgium, Luxembourg, and Northern France. In 2012, Sator had revenue of EUR 288.0 million ($375 million) and EBITDA of EUR 24.0 million ($31 million). LKQ expects to pay EUR 210 million and to close the transaction in May. We estimate that after interest expense and taxes, Sator should be slightly accretive to 2013 by at least $0.02 per share. However, we had already been anticipating acquisitions and are currently estimating 2013 EPS of $1.10 versus the Street consensus of $1.06. As a result, we see no reason to change our model. However, given LKQ’s voracious acquisition appetite and given its ability to piece together deals that result in accretion, it’s likely we will need to revisit our DCF model and our fair value estimate in the not-too-distant future. While we like LKQ’s business model, its disciplined acquisition strategy, and how the company has established a narrow economic moat on its efficient scale, the Street has also caught on to this story, pushing the shares into 2-star territory on our $19 fair value estimate.