When Will Strattec Security's Restructuring Begin to Show Results?

Strattec Security Corporation STRT, a leading global company that manufactures high-tech locking and access systems for cars, is retaining a larger share of the revenue it generates from each sale as profit. One of the most notable financial successes for STRT in the last reported quarter was the substantial improvement in profit margins, specifically as the gross margin surged 560 basis points year over year, reaching almost 16%. The factors that contributed to these positive developments include the company’s initiatives to strategically raise prices on some of its products while enhancing its operations with favorable currency exchange rates.

What is more encouraging is the rise in STRT’s adjusted EBITDA margin, which jumped from 4.4% to almost 9% year over year. With EBITDA representing the core health of the company’s business, like building and selling automotive security products, it is becoming more profitable over time.

Most importantly, STRT has witnessed this growth while investing in hiring talent and operational restructuring in Mexico and Milwaukee. This initiative to increase its profits while investing in growth projects reflects STRT’s smart financial management. It is to be noted that Strattec Securityexpects that the changes it made to improve efficiency, especially in Mexico and Milwaukee, will start showing their full benefits in the first quarter of fiscal 2026.

Are AXL and BWA on a Path to Greater Operational Profitability?

Both American Axle & Manufacturing Holdings, Inc. AXL and BorgWarner BWA are possibly on a path to greater operational profitability like STRT.

AXL projects its adjusted EBITDA to be between $665 million and $745 million for full-year 2025 and positive free cash flow. Notably, AXL emphasized a focus on long-term profitable growth, especially with the Dowlais integration and restructuring to reduce fixed costs.

For 2025, BWA aims to maintain a 9.6% to 10.2% operating margin and generate $650 million to $750 million in free cash flow, reaffirming its confidence in sustained profitable growth. Notably, BWA's business has become more profitable over time thanks to margin expansion, strategic exits and strong cost control. The company is performing well even in a challenging market.

STRT’s Price Performance, Valuation & Estimates

Shares of STRT have jumped 147.3% over the past year, outpacing the 4.5% decline of the composite stocks belonging to the industry.

From a valuation standpoint, STRT trades at a trailing 12-month price-to-earnings (P/E) of 10.86x. This is below the broader industry average of 25.22x.

The Zacks Consensus Estimate for STRT’s fiscal 2025 earnings hasn't witnessed any revisions over the past seven days.

STRT currently sports a Zacks Rank #1 (Strong Buy).  You can see the complete list of today’s Zacks #1 Rank stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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