Episode Details

Strattec Security Corporation (STRT) Q4 FY2026 — Fiscal Q4 and FY2026 (periods ended June 28, 2026): Q4 sales $151.8m vs $152.0m; Q4 gross margin 15.6% vs 16.7%; Q4 profit from operations $6.2m, down 27.5%; Q4 adjusted EBITDA $12.5m vs $13.0m; Q4 adjusted EPS $2.06, identical to a year earlier, against a $1.36 estimate; Q4 GAAP EPS $0.95 vs $2.01. FY sales $579.4m, up 2.5%; FY adjusted EBITDA $50.5m, up 15.3%. Shares closed August 26 at $72.76, down 7.98% from $79.07 on 274,608 shares, 3.4x the 30-day median. Strattec Security reported fiscal Q4 and full-year 2026 adjusted EPS of $2.06 against a $1.36 estimate - a 51% beat - and the stock fell 7.98% the next session. Two things explain it. First, that $2.06 is EXACTLY what the company earned on the same adjusted basis a year earlier, to the cent, while profit from operations fell 27.5%. Second, the company's own per-quarter reconciliation shows the full-year improvement was entirely a first-half event: profit from operations ran +$5.4m and +$2.7m against the prior year in the September and December quarters, then -$2.0m and -$2.3m in March and June. The first half added $8.1m; the second half gave $4.4m back; the whole year gained $3.7m. THE CALL: HOLD (3/5, A GENUINELY BETTER YEAR WHOSE ENTIRE IMPROVEMENT WAS EARNED IN THE FIRST HALF) — base-case value ~$75.99 vs ~$72.76 today. KEY METRICS: - THE SPINE: profit from operations against the prior-year quarter ran +$5.4m, +$2.7m, then -$2.0m and -$2.3m. First half +$8.1m, second half -$4.4m, full year +$3.7m. - THE EXIT RATE: adjusted EBITDA by fiscal 2026 quarter $15.6m, $12.3m, $10.1m, $12.5m. Margin 10.2% to 8.3%, under the 8.5% of the year-ago quarter. - THE BEAT: adjusted EPS $2.06 vs a $1.36 estimate is +51%. It is also identical to the $2.06 of a year earlier. GAAP EPS was $0.95 vs $2.01. - THE TAX: Q4 effective rate 62.4% vs 21.2%. Pre-tax profit fell only 6% but tax expense rose to $6.0m, and a $2.4m discrete tax item is 53% of the whole GAAP-to-adjusted bridge. - THE YEAR, CONCEDED: sales $579.4m up 2.5%, gross margin 16.5% wider by 149 basis points, adjusted EBITDA $50.5m up 15.3%, adjusted EPS $6.88 vs $5.38. - THE BALANCE SHEET: $108.2m cash, $0.0m borrowings, enterprise value $208.0m = 4.12x. Free cash flow $39.0m = $9.80 a share, a 13.5% yield. - BASIS PROVED: all four filed quarters sum exactly to the filed year on sales, operating profit, adjusted EBITDA and both earnings measures. - OUR CALL: HOLD, 3/5, fair value $75.99 vs $72.76. Bear $63.45, base $77.03, bull $86.46. The only sourced Street target is $89.00, set 107 days before this print. What to watch: UP: fiscal 2026 was genuinely better - sales $579.4m up 2.5%, gross margin 16.5% wider by 149 basis points, adjusted EBITDA $50.5m up 15.3%. ZERO borrowings after repaying $8.0m, and $108.2m of cash - $27.21 a share, 37% of the price - leaving an enterprise value of $208.0m, or 4.12x. Free cash flow $39.0m, $9.80 a share, a 13.5% yield, and clean: working capital added just +$0.5m against +$37.5m last year. The board bought $7.4m of stock at $67.10 and authorised a new $40.0m programme. DOWN: the exit quarter margin of 8.3% is below the 10.2% the year opened with AND the 8.5% of the year-ago quarter; the second half annualises at $45.3m against a $50.5m year; fiscal 2027 was guided with the three largest customers down ~6% and a peso move worth ~100 basis points of gross margin; capital spending ran at 49% of depreciation. Also on YouTube: @ChargedAlpha DISCLAIMER: For informational and educational purposes only. Not financial advice. Do your own research before any investment decision.