Loar Holdings Earnings Call Signals Profitable Growth

Loar Holdings Inc. ((LOAR)) has held its Q4 earnings call. Read on for the main highlights of the call.

Loar Holdings Inc. struck an upbeat tone on its latest earnings call, underscoring record revenue, record adjusted EBITDA and expanding margins despite higher interest costs and acquisition-related accounting noise. Management highlighted powerful cash generation, a deep new-product pipeline and active M&A, and even with near-term EPS pressure, boosted its outlook through 2026.

Record Revenue and Quarterly Performance

Loar reported record full-year sales of $500 million alongside a record fourth quarter, confirming strong momentum across its portfolio. Q4 sales rose 17% year over year, with various pro forma snapshots showing growth approaching or exceeding 20%, underscoring both organic strength and recent acquisition contributions.

Strong Adjusted EBITDA and Margin Expansion

Adjusted EBITDA reached a record $189 million for 2025, an increase of $43 million versus 2024, reflecting meaningful operating improvement. Fourth-quarter adjusted EBITDA grew by $10 million with a margin of 38.7%, and management is now openly targeting an ambitious roughly 40% adjusted EBITDA margin in 2026.

Improved Gross Profit and Operating Leverage

Gross profit margins moved sharply higher as Loar’s scale and mix shift kicked in, with Q4 gross margin up about 320 basis points from a year earlier. For the full year, gross margin rose to 52.7%, roughly 330 basis points better, driven by operating leverage, strategic pricing and a favorable mix toward higher-value content.

Commercial Aftermarket and OEM Growth

Commercial aerospace demand remained a core growth pillar, with aftermarket sales up 19% for the year and accelerating to 34% growth in Q4 as aging fleets and robust travel boosted parts demand. Commercial OEM sales climbed roughly 11% for the year and 8% in Q4, reflecting a healthier production backdrop from aircraft manufacturers.

Defense Sales Momentum

Defense revenue advanced 19% year over year and 14% in the fourth quarter, fueled by strong demand, new product introductions and market share gains across key platforms. Management sees defense as a continued growth driver supported by geopolitical dynamics, while stressing that order timing makes this business inherently uneven by quarter.

Exceptional Free Cash Flow Conversion

Cash generation was a standout, with free cash flow conversion of 138% for 2025 and an even stronger 160% after adjusting for a one-time tax benefit. With capital expenditures running at about 3% of sales and guided to roughly $19 million for 2026, Loar is converting earnings into cash at a rate that supports both debt reduction and acquisition firepower.

Robust M&A Activity and $600 Million Product Pipeline

Since going public, Loar has deployed more than $1.1 billion on acquisitions, effectively doubling its size, with LMB Fans & Motors and Harper Engineering among the latest additions. Management pointed to a new-product pipeline worth over $600 million in potential sales over five years and expects M&A to remain central, historically executing one to two deals a year.

2026 Upward Guidance and Financial Targets

The company raised its 2026 financial outlook, now projecting net sales of $640 million to $650 million and adjusted EBITDA of $253 million to $258 million, implying about a 40% margin. Net income is expected between $59 million and $63 million and adjusted EPS of $0.76 to $0.80, reflecting robust growth but also the impact of acquisition-related expenses.

Adjusted EPS Guidance Reduced Due to Acquisition Accounting

Despite higher revenue and EBITDA targets, Loar cut its adjusted EPS guidance to the $0.76 to $0.80 range, citing incremental non-cash depreciation and amortization tied to recent deals. Management emphasized that these charges are largely accounting in nature and should fade as synergies build, positioning earnings to better reflect the underlying cash economics over time.

Higher Interest Expense from Acquisition Funding

Financing the LMB and Harper acquisitions is set to push full-year interest expense to about $80 million, pressuring 2026 net income even as operations strengthen. Investors are being asked to look through this near-term drag, with management arguing that the acquired assets will scale and support higher EBITDA in future years.

Public Company and Integration Costs

Loar noted that ongoing public company obligations, including compliance and governance requirements, are now largely embedded in its 2025 run-rate cost structure. These expenses, along with one-time transaction and integration costs, have partly offset margin gains versus the pre-IPO era, but management believes they are manageable against the larger earnings base.

Defense Revenue Volatility

While defense growth has been impressive, the company reiterated that order patterns create a “lumpy” revenue profile that can skew quarterly comparisons. This volatility introduces forecasting risk for investors even as the long-term trajectory appears favorable, reinforcing the need to focus on multi-year trends rather than single quarters.

Acquisition-Related Margin Dilution Risk

Management acknowledged that acquisitions can temporarily dilute margins when bought businesses operate below the corporate average, raising execution risk. As Loar continues to lean on M&A for growth, the timing of synergies and integration success will be critical in translating deal activity into sustained margin and earnings expansion.

Forward-Looking Guidance and Growth Outlook

Looking ahead, Loar forecasts organic sales growth of more than 10% annually and adjusted EBITDA growth of at least 15%, with commercial OEM and aftermarket expected to grow at low double-digit rates and defense in the mid-single digits. The company is planning capital spending at roughly 3% of sales, while anticipating higher interest and non-cash charges, and expects recent acquisitions to become meaningfully accretive over the next several years.

Loar’s earnings call painted a picture of a high-margin aerospace supplier leaning into both organic growth and acquisitions, while navigating the short-term costs of expansion and public-company life. For investors, the key takeaway is a business delivering record results and stronger long-term guidance, but with near-term EPS muted by financing and accounting headwinds.