On Wednesday, RBC Capital adjusted its outlook on shares of Loar Holdings Inc (NYSE: LOAR), increasing the price target to $80 from the previous $65 while retaining an Outperform rating on the stock. Loar Holdings recently reported robust financial results for the second quarter of 2024, showcasing an adjusted EBITDA of $35 million, which translates to a 36% margin, and total sales reaching $97 million. This sales figure represents approximately 17% organic growth for the company.
The firm has also raised its full-year 2024 guidance, which was largely anticipated by investors. Moreoverr, Loar Holdings expressed a positive stance on its mergers and acquisitions (M&A) prospects and the strength of the commercial aerospace aftermarket, which is a critical segment for the company.
According to RBC Capital, Loar Holdings has demonstrated commendable performance in its initial full quarter as a publicly traded entity. The analyst firm notes that investor sentiment towards Loar Holdings remains positive.
RBC Capital's decision to maintain the Outperform rating and elevate the price target to $80 is based on the company's solid quarterly achievements and its optimistic future business activities. The analyst firm has expressed confidence in the company's ongoing growth trajectory and market position.
In other recent news, Loar Holdings has reached a definitive agreement to acquire Applied Avionics for $385 million. Applied Avionics, a key player in avionics interface solutions, is projected to generate sales of $40 million and an adjusted EBITDA of $21 million by 2024.
The acquisition aligns with Loar's strategy to strengthen its aftermarket presence. In terms of financing, Loar plans to utilize additional borrowings and cash on hand, expecting to receive tax benefits estimated at $45 million from the transaction.
In recent developments, financial firms Jefferies, Citi, Morgan Stanley, and RBC Capital initiated coverage on Loar Holdings. Jefferies and Citi both started with a Buy rating, highlighting the company's potential to generate around $200 million in free cash flow in 2025 and 2026 and its strategic focus on proprietary products. Morgan Stanley initiated coverage with an Equalweight rating, acknowledging Loar's aftermarket services focus.
RBC Capital started with an Outperform rating, citing the company's significant aftermarket profits and potential for steady margin growth. These developments underscore a positive outlook on Loar Holdings' growth trajectory and financial strategy.
InvestingPro Insights
Loar Holdings Inc (NYSE: LOAR) has garnered attention with its impressive financial performance and RBC Capital's recent price target increase. The InvestingPro platform offers additional insights that could provide investors with a deeper understanding of the company's valuation and market performance. According to InvestingPro data, Loar Holdings has a market capitalization of $6.65 billion and an eye-catching revenue growth of 31.12% for Q2 2024. This growth aligns with the organic growth highlighted in the company's recent financial results.
The company's gross profit margin stands strong at 48.23%, which reinforces the "Impressive gross profit margins" highlighted by InvestingPro Tips. This margin strength is a testament to the company's ability to maintain profitability amidst its operations. Furthermore, Loar Holdings has experienced a significant return over the last week, with a price total return of 28.27%, which is part of a broader trend that includes a 51.82% return year-to-date. This performance is indicative of the positive investor sentiment noted by RBC Capital.
Investors should note that Loar Holdings is trading at a high earnings multiple, with a P/E ratio of 956.93, which may suggest a premium valuation compared to industry peers. However, this high multiple may be justified by the company's strong growth prospects and market position. For those interested in exploring further, there are additional InvestingPro Tips available, providing more in-depth analysis and metrics for Loar Holdings.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.