Loar Holdings: A High-Conviction Buy as Earnings Surprises, Strong Margins, and Strategic Acquisitions Drive Long-Term Value Creation

When a company not only meets expectations but shatters them with a 26.9% revenue surge and a 118.7% leap in net income, it demands attention. Loar Holdings (LOAR) delivered just that in Q2 2025, proving why it's one of the most compelling aerospace and defense plays on the market. With a 38.3% adjusted EBITDA margin, a 51% growth in defense sales, and a strategic acquisition that adds $500 million in future sales potential, this stock is a masterclass in value creation. Let's break down why investors should be all-in on this high-conviction name.

Q2 2025: A Quarter of Explosive Execution

Loar's Q2 results were nothing short of extraordinary. Net sales hit $123.1 million, a 26.9% year-over-year jump, driven by 18% growth in Commercial OEM, 29% in Commercial Aftermarket, and a jaw-dropping 51% in Defense. But the real story lies in the margins. Adjusted EBITDA surged 34.5% to $47.1 million, with the margin expanding from 36.1% to 38.3%. This wasn't just volume—it was execution. The company's focus on higher-margin products, coupled with disciplined cost management, turned a 26.9% revenue gain into a 38.3% margin.

And let's not forget the EPS fireworks. Diluted EPS rocketed 88.9% to $0.17, while adjusted EPS hit $0.23, a 76.9% increase. These numbers aren't just impressive; they're a sign of a company that's mastering its cost structure while scaling. The 13.6% net income margin in Q2 2025 compared to 7.9% in Q2 2024? That's the kind of margin expansion that turns good companies into great investments.

Strategic Acquisitions: The Beadlight Play

Loar's acquisition of Beadlight Ltd. in July 2025 isn't just a line item—it's a strategic masterstroke. Beadlight's niche expertise in aerospace lighting and air filtration systems slots perfectly into Loar's commercial aerospace portfolio. This isn't a me-too acquisition; it's a value-creation engine. The Witney, England, facility adds cutting-edge illumination solutions, a critical component for next-gen aircraft. And with Beadlight's operations expected to be accretive by 2026, this move positions Loar to capitalize on the $500 million in new sales opportunities over the next five years.

Margin Expansion and Cost Discipline: A Recipe for Resilience

The company's ability to expand margins while investing in growth is a rare and valuable trait. Loar's 480-basis-point improvement in gross profit margin and 148% cash flow conversion rate in the first half of 2025 highlight its operational rigor. Even as public company costs rise, the recent credit agreement amendment—cutting interest expenses by $2 million annually—shows management's commitment to preserving margins. With full-year interest expenses now projected at $26 million (down from $28 million), the company is buying itself more flexibility to reinvest in innovation.

Revised Guidance: A Green Light for Aggressive Investment

Loar's upwardly revised 2025 guidance is a green flag for investors. The new $486–$494 million revenue range and $65–$70 million net income target imply a 25%+ growth trajectory. Adjusted EBITDA is now projected at $184–$187 million, with a 38% margin—proof that this isn't a one-quarter miracle but a sustainable model. The 16% increase in adjusted EPS guidance to $0.83–$0.88 further underscores the company's ability to deliver shareholder value.

The Long Game: Innovation and a Robust Pipeline

What truly sets Loar apart is its relentless focus on innovation. The company's pipeline of new product introductions—targeting $500 million in sales over five years—ensures it's not just riding a short-term wave but building a long-term moat. Defense sales, already up 51% in Q2, are poised to benefit from global geopolitical tensions, while commercial aerospace demand remains robust. With Beadlight's tech and Loar's acquisition prowess, this is a company that's constantly reinventing itself.

Investment Thesis: Why This Is a High-Conviction Buy

For investors seeking a fundamentally strong aerospace play, Loar Holdings checks every box:
1. Earnings Surprises: Consistently outperforming revenue and margin targets.
2. Margin Expansion: A 38.3% adjusted EBITDA margin with room to grow.
3. Strategic Acquisitions: Beadlight adds $500 million in future sales potential.
4. Cost Discipline: Interest expense cuts and efficient capital allocation.
5. Growth Catalysts: A $500 million product pipeline and a 25%+ revenue growth trajectory.

At current valuations, Loar trades at a discount to its peers, offering a compelling risk-reward profile. With a 25% effective tax rate and $14 million in planned capex for 2025, the company is balancing reinvestment with profitability. This is a stock for the aggressive investor—someone who wants to ride the next phase of aerospace and defense growth with a company that's already proven it can execute.

Final Call: Buy Loar Holdings with conviction. The numbers speak for themselves, and the strategic moves are setting up a multiyear win. This isn't just a stock—it's a story of relentless innovation and margin-driven growth. And in today's market, that's exactly what you want to own.