Continuing to Execute on its Growth Strategy

Summary of Loar Holdings Inc Conference Call Company Overview - Company: Loar Holdings Inc (LOAR.N) - Industry: Aerospace - Market Cap: $7,554 million - Current Stock Price: $82.17 (as of November 14, 2024) - Price Target: Increased from $75.00 to $89.00 Key Financial Metrics - 2024 Estimated Revenue: $394 million (previous guidance: $374-$378 million) [doc id='18'] - 2024 Estimated Adjusted EBITDA: $143 million (previous guidance: $134-$136 million) [doc id='18'] - 2024 Estimated Adjusted EPS: $0.37 (previous guidance: $0.44-$0.46) [doc id='18'] - 2025 Estimated Revenue: $470-$480 million [doc id='20'] - 2025 Estimated Adjusted EBITDA: $176-$180 million [doc id='20'] - 2025 Estimated Adjusted EPS: $0.45-$0.50 [doc id='20'] - 2026 Estimated Adjusted EBITDA: $212 million [doc id='13'] Growth Strategy - Execution of Growth Strategy: Loar continues to execute on both organic and inorganic growth strategies, with a focus on mergers and acquisitions (M&A) [doc id='2'][doc id='3'] - M&A Activity: Management has closed 17 acquisitions over the last 13 years, targeting companies with valuable intellectual property and strong customer relationships [doc id='17'] - Incremental M&A Contribution: Estimated potential acquired EBITDA of $5 million included in the base case valuation [doc id='13'] Market Performance - Stock Reaction: Following the 3Q24 earnings report, LOAR's stock fell approximately 8.1%, which is viewed as overdone given the robust growth across OEM, aftermarket, and defense sectors [doc id='4'] - Year-over-Year Growth: - OEM sales increased by 21% - Aftermarket sales increased by 19% - Defense sales increased by 25% [doc id='4'] Future Outlook - 2025 Growth Drivers: Expected growth in Commercial OEM, aftermarket, and defense sectors, with high single-digit to double-digit growth rates anticipated [doc id='20][doc id='19'] - Free Cash Flow Conversion: Management expects free cash flow conversion of over 125% in 2025, assuming no additional acquisitions [doc id='20'] Risks and Considerations - Interest Expense: Higher interest expenses from recent acquisitions may impact margins [doc id='16'] - Regulatory Risks: Potential regulatory challenges in acquiring PMA parts [doc id='27'] - Market Conditions: Weaker than expected market conditions could affect performance [doc id='27'] Valuation Metrics - EV/EBITDA Multiple: Maintained at 40x, reflecting a premium compared to peers [doc id='5'] - Projected EBITDA Margins: Estimated adjusted EBITDA margin of approximately 39% for 2026 [doc id='13'] Conclusion - Investment Rating: Maintained an Equal-weight rating, balancing strong growth potential with current valuation [doc id='11'] - Price Target Justification: The price target of $89 is based on projected revenue and EBITDA growth, alongside the potential for future acquisitions [doc id='13']