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STRT Q3 Earnings Miss Estimates on Lower Volume and Forex Drag
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Key Takeaways
STRT Q3 adjusted EPS fell to 90 cents and sales to $137.6M, missing consensus on weaker volumes
GM, Ford and Stellantis drove 65% of revenues. Door handles and power access products made up half of sales.
Forex hit costs by $2.5M and tariffs by $0.3M. Outlook calls for Q4 revenue decline of 3-4% YoY.
Strattec Security Corporation (STRT - Free Report) reported third-quarter fiscal 2026 adjusted earnings of 90 cents per share, missing the Zacks Consensus Estimate of $1.14 by 21.1%. Adjusted earnings declined 40% from $1.50 a year ago.
Net sales were $137.6 million, down 4.5% year over year, and came in below the consensus estimate of $141 million by about 2.4%. Results reflected lower North American OEM production on key platforms and the impact of EV program cancellations.
Strattec Leans on Core Customers and Access Products
The quarter’s revenue mix underscored STRT’s close ties to large automotive programs. General Motors accounted for 28% of third-quarter sales, followed by Ford at 21% and Stellantis at 16%. Tier 1 customers contributed 15%, commercial and other customers represented 11% and Hyundai/Kia made up 9%.
Product concentration also remained clear. Door handles represented 26% of sales and power access products contributed 24%. Keys and locksets were 20% of the mix, with latches at 13%, user interface controls at 8%, aftermarket at 7% and other products at 2%. The mix highlights STRT’s positioning in access and security content per vehicle, but also means near-term results can swing with platform volumes.
STRT Absorbs FX and Tariff Pressure
Cost headwinds were evident even as the company executed on internal actions. Gross profit was $22.7 million compared with $23.1 million in the prior-year quarter, reflecting lower volume. However, gross margin improved 50 basis points year over year to 16.5%, thanks to restructuring savings and recoveries from customer program cancellations. Restructuring savings totaled $1.7 million and recoveries tied to customer program cancellations added $0.6 million.
Those benefits were partly offset by $2.5 million of higher costs from unfavorable foreign exchange movements, a $0.5 million increase in labor and benefit costs, and $0.3 million of incremental tariff costs.
Strattec Steps Up Spending, Operating Profit Hit
Operating discipline was pressured by higher overhead spending. Selling, administrative and engineering expenses increased $1.6 million year over year to $17.6 million, representing 12.8% of sales versus 11.1% in the prior-year period.
The increase reflected a mix of strategic and recurring cost items. STRT cited $1.4 million of business transformation and executive transition costs, a $1.3 million rise in salaries and employee benefits, and a $0.4 million increase in professional fees. These were partially offset by $0.2 million of restructuring savings and a $0.7 million recovery of costs related to canceled EV programs.
Operating income declined to $5 million from $7.1 million a year ago, with operating margin at 3.7% compared with 4.9% in the prior-year quarter. Interest income increased to $0.9 million from $0.5 million, while other expenses totaled $0.7 million versus near breakeven a year ago. Net income attributable to STRT was $3.2 million compared with $5.4 million in the prior-year period. Adjusted EBITDA was $10.1 million, or 7.3% of net sales, compared with $12.9 million, or 8.9%, a year ago.
STRT’s Financial Position
Liquidity remained a key support. Cash and cash equivalents were $107 million as of March 29, 2026, up from $99 million at the end of the second quarter of fiscal 2026 and $84.6 million at the end of fiscal 2025. Total debt was reduced to $1 million from $8 million at fiscal-year end, leaving debt-to-total capitalization at 0.3%.
Cash generation was positive but moderated by working capital. Net cash provided by operating activities was $11.4 million in the quarter versus $20.7 million a year ago. Capital expenditures were $2.6 million, leading to free cash flow of $8.8 million compared with $19.5 million in the prior-year quarter.
The company reiterated capital priorities centered on funding organic growth programs, investing in automation and process modernization, and preserving flexibility through cyclical automotive conditions.
STRT Outlook Points to Softer Q4 Revenues
Management expects near-term sales to track North American auto production volumes, but expects fourth-quarter fiscal 2026 revenues to be down 3% to 4% year over year, reflecting continued EV cancellations and lower production on key programs.
The company reiterated its longer-term objective of reaching gross margins of 18% to 20% over the next few years. STRT also expects operating costs to run at 10% to 11% of revenues, excluding unusual items, while it continues investing in its transformation program.
Peer Releases
Gentex Corporation (GNTX - Free Report) reported first-quarter 2026 results on April 24. The company’s adjusted earnings of 48 cents per share beat the Zacks Consensus Estimate of 44 cents. The figure increased 11.6% from 43 cents a year ago. Gentex’s net sales were $675 million, which topped the consensus mark of $647 million. Revenues rose 17.1% from $577 million in the year-ago quarter, aided by contributions from VOXX and a richer mix of advanced features.Gentex raised its full-year 2026 revenue outlook to $2.65-$2.75 billion from the previous estimate of $2.6-$2.7 billion, while maintaining its gross margin guidance at 34-35%.
Magna International Inc. (MGA - Free Report) reported first-quarter 2026 results on May 1. The company’s adjusted earnings of $1.38 per share increased 76.9% year over year and beat the Zacks Consensus Estimate of $1.01. Magna’s net sales rose 3.1% year over year to $10.38 billion and topped the Zacks Consensus Estimate of $10.08 billion by 3.03%.For 2026, Magna revised its total sales outlook. It now projects total sales of $41.5-$43.1 billion, down from the previous guidance of $41.9-$43.5 billion. The company projects an adjusted EBIT margin of 6-6.6%, the same as the prior guidance.
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STRT Q3 Earnings Miss Estimates on Lower Volume and Forex Drag
Key Takeaways
Strattec Security Corporation (STRT - Free Report) reported third-quarter fiscal 2026 adjusted earnings of 90 cents per share, missing the Zacks Consensus Estimate of $1.14 by 21.1%. Adjusted earnings declined 40% from $1.50 a year ago.
Net sales were $137.6 million, down 4.5% year over year, and came in below the consensus estimate of $141 million by about 2.4%. Results reflected lower North American OEM production on key platforms and the impact of EV program cancellations.
STRT stock currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Strattec Security Corporation Price, Consensus and EPS Surprise
Strattec Security Corporation price-consensus-eps-surprise-chart | Strattec Security Corporation Quote
Strattec Leans on Core Customers and Access Products
The quarter’s revenue mix underscored STRT’s close ties to large automotive programs. General Motors accounted for 28% of third-quarter sales, followed by Ford at 21% and Stellantis at 16%. Tier 1 customers contributed 15%, commercial and other customers represented 11% and Hyundai/Kia made up 9%.
Product concentration also remained clear. Door handles represented 26% of sales and power access products contributed 24%. Keys and locksets were 20% of the mix, with latches at 13%, user interface controls at 8%, aftermarket at 7% and other products at 2%. The mix highlights STRT’s positioning in access and security content per vehicle, but also means near-term results can swing with platform volumes.
STRT Absorbs FX and Tariff Pressure
Cost headwinds were evident even as the company executed on internal actions. Gross profit was $22.7 million compared with $23.1 million in the prior-year quarter, reflecting lower volume. However, gross margin improved 50 basis points year over year to 16.5%, thanks to restructuring savings and recoveries from customer program cancellations. Restructuring savings totaled $1.7 million and recoveries tied to customer program cancellations added $0.6 million.
Those benefits were partly offset by $2.5 million of higher costs from unfavorable foreign exchange movements, a $0.5 million increase in labor and benefit costs, and $0.3 million of incremental tariff costs.
Strattec Steps Up Spending, Operating Profit Hit
Operating discipline was pressured by higher overhead spending. Selling, administrative and engineering expenses increased $1.6 million year over year to $17.6 million, representing 12.8% of sales versus 11.1% in the prior-year period.
The increase reflected a mix of strategic and recurring cost items. STRT cited $1.4 million of business transformation and executive transition costs, a $1.3 million rise in salaries and employee benefits, and a $0.4 million increase in professional fees. These were partially offset by $0.2 million of restructuring savings and a $0.7 million recovery of costs related to canceled EV programs.
Operating income declined to $5 million from $7.1 million a year ago, with operating margin at 3.7% compared with 4.9% in the prior-year quarter. Interest income increased to $0.9 million from $0.5 million, while other expenses totaled $0.7 million versus near breakeven a year ago. Net income attributable to STRT was $3.2 million compared with $5.4 million in the prior-year period. Adjusted EBITDA was $10.1 million, or 7.3% of net sales, compared with $12.9 million, or 8.9%, a year ago.
STRT’s Financial Position
Liquidity remained a key support. Cash and cash equivalents were $107 million as of March 29, 2026, up from $99 million at the end of the second quarter of fiscal 2026 and $84.6 million at the end of fiscal 2025. Total debt was reduced to $1 million from $8 million at fiscal-year end, leaving debt-to-total capitalization at 0.3%.
Cash generation was positive but moderated by working capital. Net cash provided by operating activities was $11.4 million in the quarter versus $20.7 million a year ago. Capital expenditures were $2.6 million, leading to free cash flow of $8.8 million compared with $19.5 million in the prior-year quarter.
The company reiterated capital priorities centered on funding organic growth programs, investing in automation and process modernization, and preserving flexibility through cyclical automotive conditions.
STRT Outlook Points to Softer Q4 Revenues
Management expects near-term sales to track North American auto production volumes, but expects fourth-quarter fiscal 2026 revenues to be down 3% to 4% year over year, reflecting continued EV cancellations and lower production on key programs.
The company reiterated its longer-term objective of reaching gross margins of 18% to 20% over the next few years. STRT also expects operating costs to run at 10% to 11% of revenues, excluding unusual items, while it continues investing in its transformation program.
Peer Releases
Gentex Corporation (GNTX - Free Report) reported first-quarter 2026 results on April 24. The company’s adjusted earnings of 48 cents per share beat the Zacks Consensus Estimate of 44 cents. The figure increased 11.6% from 43 cents a year ago. Gentex’s net sales were $675 million, which topped the consensus mark of $647 million. Revenues rose 17.1% from $577 million in the year-ago quarter, aided by contributions from VOXX and a richer mix of advanced features.Gentex raised its full-year 2026 revenue outlook to $2.65-$2.75 billion from the previous estimate of $2.6-$2.7 billion, while maintaining its gross margin guidance at 34-35%.
Magna International Inc. (MGA - Free Report) reported first-quarter 2026 results on May 1. The company’s adjusted earnings of $1.38 per share increased 76.9% year over year and beat the Zacks Consensus Estimate of $1.01. Magna’s net sales rose 3.1% year over year to $10.38 billion and topped the Zacks Consensus Estimate of $10.08 billion by 3.03%.For 2026, Magna revised its total sales outlook. It now projects total sales of $41.5-$43.1 billion, down from the previous guidance of $41.9-$43.5 billion. The company projects an adjusted EBIT margin of 6-6.6%, the same as the prior guidance.