How Well is Strattec's Business Model Insulated From Tariff Pressures?

One of the most favorable aspects of StrattecSecurity STRT is that more than 90% of its sales in the United States qualify for tariff-free or reduced-tariff rules. This shields Strattec, a focused automotive technology supplier, from additional expenses that other players might face if there is a rise in tariffs on imports, especially if the U.S. tightens trade rules again. Also, this gives the company a cost advantage and more stability.

STRT confirmed on its latest earnings call that only 6% of its total sales are expected to be affected by the latest tariffs. This further justifies the solid business model of the company, which is less susceptible to major financial damage from tariffs.

Notably, Strattec has already taken actions to deal with even that nominal proportion of its business that might get affected by tariffs. STRT is now changing the way products are shipped so that there is no need to cross borders more than necessary, thereby saving money. Also, to adjust pricing and find better sources for materials, the company is working with suppliers and customers. These actions have already helped Strattec reduce its additional costs by roughly 30%.

Are AXL & BWA Vulnerable to Tariff Risks?

Both American Axle & Manufacturing Holdings, Inc. AXL and BorgWarner BWA operate in business lines that overlap as automotive technology suppliers. However, they each focus on different areas of vehicle systems.

It’s worth noting that while AXL is in a decent position when it comes to tariffs, it isn’t as well-prepared as Strattec. About 90% of the products AXL manufactures in the United States follow USMCA trade rules, which help avoid most tariffs.

BorgWarner, on the other hand, has made it clear that tariffs will hurt its profits this year, and it has included those costs in its full-year financial forecast. However, instead of finding ways to avoid or reduce these extra costs — like changing suppliers or shipping routes — BWA mainly plans to deal with the impact by passing the costs on to its customers.

STRT’s Price Performance, Valuation & Estimates

Shares of STRT have jumped 145.1% over the past year against the 0.6% 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 11.18x. This is below the broader industry average of 27.09x.

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

STRT stock 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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