-- Loar (LOAR) is expected to continue to drive its margin expansion as it continues to scale, with the company achieving a 40% EBITDA margin for the first time in Q1, aided by operating leverage, value-based pricing, and productivity initiatives, Morgan Stanley said in a Friday note.
The company's $700 million new business pipeline over the next five years represents an increase of about $100 million from the prior quarter and is comprised of opportunities from new product development and market share expansion with existing products, Morgan Stanley said.
Loar's management estimates that converting about 15% of this pipeline would equate to about 3% incremental growth in new business for each of the next five years, Morgan Stanley said, adding that it views the 15% conversion rate as "appropriate conservativism" from the company.
Morgan Stanley raised its adjusted EPS estimates to $1.30 from $1.26 for 2026, to $1.54 from $1.51 for 2027, and to $1.81 from $1.77 for 2028, accounting for the better-than-expected performance in Q1 and Loar's updated methodology for reporting the metric.
Morgan Stanley lowered its price target on Loar to $91 from $97 and maintained its overweight rating.
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