Freedom Broker downgraded Strattec Security Corp. to Hold from Buy, citing sustained margin pressure despite stronger-than-expected fourth-quarter results.
The brokerage reduced its price target on the auto parts maker to $83 from $89, citing headwinds from foreign exchange losses and quality-related costs. Strattec reported revenue of $151.8 million for the quarter, exceeding Freedom Broker’s estimate of $147 million and the Wall Street consensus of $147 million. Adjusted earnings per share came in at $2.06, well above the firm’s $1.43 estimate and the $1.12 analyst consensus. Full-year GAAP EPS stood at $0.95.
Gross margins remained under pressure, with a full-year figure of 16.5%, up 150 basis points from the prior year, though the fourth-quarter margin of 15.6% fell short of Freedom Broker’s forecast by about 70 basis points. The company cited $1.9 million in foreign exchange headwinds, $1.4 million in cost-of-quality issues, and the absence of $1.3 million in prior-year tooling gains as key drags on profitability.
For the full fiscal year, Strattec posted record revenue of $579.4 million, a 2.5% increase, while adjusted EBITDA rose 15.3% to $50.5 million. The company ended the period with $108.2 million in cash and no debt on its balance sheet.
Management guided for a 2% decline in North American original equipment manufacturer production, with Detroit’s Big Three output expected to fall nearly 6%. The Mexican peso is projected to average 18.00 per dollar in fiscal 2026, compared with an opening rate of 16.90. Strattec also noted service, assembly, and engineering revenue running at 11–12% of total sales.
Freedom Broker’s valuation model, which assigns Strattec a perfect Piotroski Score of 9, suggests the stock is undervalued at $73.95, trading below its estimated fair value.
