Loar Holdings Inc. (LOAR) Q3 2026 earnings review
Loar's underlying sales accelerate, while acquisition debt cuts reported profit
Loar Holdings, a maker of niche aircraft and defense parts, sped up its underlying sales growth while acquisition debt cut into reported profit. Sales from businesses owned a year ago grew 16% (total sales jumped 39% with recent buyouts), and free cash flow rose 46%, according to chief executive Dirkson Charles. Results beat what the company's own second-half plan pointed to, and finance chief Glenn D’Alessandro raised the 2026 outlook while issuing a 2027 plan that has total revenue growth slowing to 11% by our math.
| Sales from businesses owned a year ago | $146.8M +15.8% from a year ago (vs +12.3% in Q2) |
|---|---|
| Total net sales | $176.2M +39.0% from a year ago |
| Ebitda margin, excluding one-offs | 40.8% 38.7% a year ago |
| Full-year 2026 sales outlook | Raised $4M 2027 outlook: $745–755M (+11.3%) |
⚖️ Verdict: 🟢 Bullish
The story got better because sales from businesses owned a year ago broke out of their 11% to 12% range to reach 16%, and the 2027 plan calls for Ebitda margin excluding one-offs to reach 42%. One caution: beating the implied second-half run-rate shows the prior plan was cautious, and the new 2026 outlook still leaves fourth-quarter sales dipping below the third quarter as recent buyouts pass their one-year mark.
The question now is whether 16% growth in businesses owned a year ago marks a lasting step-up from new product orders or a one-quarter bump. If new parts are driving it, Loar will keep raising its 11% sales growth plan for 2027; if not, growth will settle back near 11% to 12% once acquisitions lap. The quarterly filing's underlying end-market breakdown and fourth-quarter results will tell.
🐂 Bull Case
Underlying Sales Growth Stepped Up to 15.8%
Loar makes niche aircraft and defense parts, and it has spent the past year telling investors that a $750 million pipeline of new parts would lift its growth rate. Until this quarter, sales from businesses it owned a year ago stayed near 11% to 12%. Finance chief Glenn D’Alessandro said the team is now working to "convert our record orders and current backlog into increased sales, profits and cash flow through the balance of 2026".
In the third quarter, sales from businesses owned a year ago rose 15.8%, or $20.1 million, to $146.8 million. That climbed from 11.4% in the first quarter and 12.3% in the second, even though the aerospace supplier compared against a strong year-ago defense quarter. Because the jump arrived right when those newly certified aircraft parts were due to ship, it backs up chief executive Dirkson Charles's claim that new product wins are adding to growth.
What to watch: the quarterly filing's breakdown of underlying sales by end market, plus any call update on the $750 million pipeline. Those disclosures will show how much of the 15.8% gain came from new product orders rather than July's entry of Beadlight, an aircraft lighting maker bought last year, into the comparison base.
Aircraft Makers Drove Another Margin Record
Loar sells parts both to original equipment manufacturers (OEMs), the companies that build new planes, and to the aftermarket for repairs. Charles said "Our record results in the third quarter of 2026 reflects our continued successful execution along all our value drivers". Sales to commercial, business jet and general aviation plane builders rose 42.6% from a year ago to $57.8 million, and the company raised its full-year growth assumption for that market to 19%–22% from 17%–20%.
Higher volume and recent buyouts lifted profitability across the income statement. Ebitda — earnings before interest, taxes, depreciation and amortization — excluding one-offs rose 46.5% to $71.9 million, pushing that margin up 2.1 percentage points to 40.8%. By our math, cost of sales, the cost of making the parts, fell 1.5 percentage points of revenue to 45.8%, while selling and overhead costs fell 1.1 percentage points to 27.2%.
What to watch: whether Ebitda margin excluding one-offs reaches the 42% target set in the 2027 plan. Hitting 42% next year would prove Loar can keep raising prices and cutting unit costs even as plane-builder growth cools to a low-double-digit rate.
Record Cash Flow Started Trimming Net Debt
Loar borrowed heavily over the past year to buy LMB Fans & Motors, a French maker of cooling fans, and Harper Engineering, a Seattle maker of cabin latches. Those deals pushed total debt to $952.4 million by June. In the third quarter, Charles highlighted that operating cash flow minus capital spending hit a quarterly record and rose 46% from a year ago.
By our math from the nine-month cash flow statement, third-quarter operating cash flow was $44.9 million and free cash flow was $39.4 million, or 22.4% of sales. That cash build lifted cash on hand from $122.4 million in June to $159.3 million in September. Because Loar closed no new acquisitions during the quarter, net debt — total debt minus cash — fell 4.5% from last quarter to $792.2 million by our math.
What to watch: whether management uses its $159.3 million cash balance to pay down term debt in the fourth quarter or saves it for the next acquisition. Voluntary debt repayment would lower next year's $83 million interest bill.
🐻 Bear Case
Initial 2027 Plan Shows Growth Slowing to 11%
"Demand is building across every one of our end markets as we head into 2027," Charles said when introducing next year's targets. Yet the numbers in that 2027 plan show total revenue growth dropping as the LMB and Harper Engineering acquisitions pass their one-year anniversaries in December and January.
- Third-quarter 2026 net sales: up 39.0% from a year ago to $176.2 million
- Fourth-quarter 2026 net sales: up 29.2% to $170.2 million, implied by the full-year outlook
- Full-year 2027 net sales outlook: $745 million to $755 million, or 11.3% growth at the middle of the range
- 2027 end-market assumptions: low-double-digit growth across plane builders, aftermarket and defense
Even though Loar usually sets cautious initial targets, an 11.3% top-line plan for 2027 is slower than the 15.8% underlying sales growth the business just recorded in the third quarter. It shows that once acquisition boosts fade, Loar is a low-double-digit grower rather than a nearly 40% grower.
What to watch: the first revision to the 2027 sales outlook, which typically arrives with fourth-quarter results. A raise of less than $10 million would confirm that underlying growth is settling back near 11% to 12%.
Acquisition Debt Still Weighs on Reported Profit
While operating profit rose 59.1% from a year ago to $46.2 million in the third quarter, the borrowing and accounting costs from buying LMB and Harper Engineering took a heavy toll further down the income statement. Reported net income fell 29.1% to $19.6 million, and diluted profit per share dropped from $0.29 to $0.20.
Three items caused the drop: net interest expense more than tripled from $6.0 million to $20.0 million, non-cash amortization of acquired intangible assets rose from $9.9 million to $16.6 million, and income taxes swung from a $4.6 million benefit (helped by a $10.0 million tax law gain last year) to a $6.6 million expense. By our math, even after stripping out that $10.0 million year-ago tax benefit, net income grew 11.2% against 39.0% sales growth. Profit per share excluding one-offs also fell 9.3% to $0.39.
What to watch: 2027 net interest expense, which the company forecasts at about $83 million, up from $80 million in 2026. Higher projected interest meansLoar is not planning major debt paydowns next year.
Risks This Quarter Didn't Answer
Three standing concerns from prior quarters could not be tested from the earnings release alone because the detailed tables and executive remarks live in the quarterly filing and conference call.
- Underlying defense growth: total defense sales jumped 58.2% to $45.5 million with LMB included, but the release does not state whether defense sales from businesses owned a year ago recovered from their first-half drop; the quarterly filing will show it.
- Aftermarket inventory destocking: total commercial aftermarket sales rose 23.1% to $62.7 million, but the like-for-like growth rate and airline inventory levels are call disclosures.
- Acquisition price discipline: Loar closed no deals this quarter, leaving management's view on buyout prices to the call.
👓 Other Themes
Aging Airlines and Global Conflicts Lift 2027 Demand
Charles said industry conditions support all three of Loar's end markets next year. Plane builders are raising production rates, commercial repair demand stays high as "airlines keep an aging fleet flying longer", and military orders are rising on "global demand driven by geo-political and kinetic conflicts". That industry backdrop led the company to lift its 2027 defense growth assumption to low-double digits, up from mid-single digits in 2026.
💲 Other KPIs
Working capital grew slower than revenue in the third quarter. Inventories rose 22.0% from a year ago to $128.6 million, and accounts receivable — money customers owe for delivered parts — rose 36.6% to $107.3 million, both below the 39.0% increase in net sales. Keeping inventory growth below sales growth helped drive the quarter's record cash flow.
Factory and equipment spending nearly doubled from $2.8 million a year ago to $5.5 million in the third quarter, or 3.1% of sales, by our math from the nine-month cash flow statement. Year-to-date capital spending reached $12.5 million, up from $7.5 million last year as the parts maker adds manufacturing capacity.
Weighted-average diluted shares dipped 0.1% from a year ago to 95.77 million in the third quarter, and rose slightly from 95.52 million in the second quarter. Unlike peers that issue stock to fund buyouts, the aerospace group paid for its recent acquisitions with debt and cash, keeping share dilution near zero.
🔮 Guidance
Raised. D’Alessandro said "We’re raising our full year 2026 outlook for the third time this year", lifting the middle of the range by $4 million to 35.8% growth. By our math, that leaves $170.2 million for Q4, down from $176.2 million in Q3 and up 29.2% from a year ago. The three raises since the acquisitions closed moved the midpoint by +$5M, +$20M and +$4M.
Raised. The middle of the range moved up $5 million to $272.5 million, or 44.1% growth from last year, while the full-year margin target stayed at about 40%. By our math, the plan leaves $67.9 million for Q4 (up 36.4% from a year ago, or a 39.9% margin). Across the year's three raises, the midpoint climbed by +$4M, +$8M and +$5M.
Raised. Management lifted the range by $4 million and raised the net income margin target from about 8% to about 9%, though full-year profit is still set to fall 14.1% from last year's $72.1 million on acquisition interest and amortization. By our math, the outlook leaves $14.5 million of net income for Q4, down from $19.6 million in Q3.
Raised. The middle of the range rose $0.045 to $0.64 per share, which is 14.7% below last year's $0.75. Because the company earned $0.50 per share across the first nine months, the full-year plan leaves $0.14 per share for Q4 by our math, compared with $0.20 in Q3 and $0.13 in Q4 last year.
Raised. The middle of the range moved up $0.04 to $1.38 per share, or 32.7% growth over last year's $1.04. With $1.11 per share already recorded in the first nine months, the outlook leaves $0.27 per share for Q4 by our math, down from $0.39 in Q3 and up from $0.26 a year ago.
Unchanged. The plan keeps full-year net interest at about $80 million, depreciation at about $15 million and intangible amortization at about $65 million. By our math from the nine-month figures, that leaves Q4 at about $21.3 million of interest, $5.0 million of depreciation and $16.2 million of amortization, all close to Q3 levels.
New. The initial 2027 plan calls for $750 million of sales at the middle of the range, or 11.3% growth over the revised 2026 outlook. It rests on low-double-digit growth assumptions across plane builders, aftermarket repairs and defense, as the LMB and Harper Engineering buyouts enter the comparison base.
New. The 2027 plan projects $314.5 million at the middle of the range, up 15.4% from the 2026 outlook midpoint, with the margin rising from about 40% in 2026 to about 42% in 2027. That 2-point margin step-up is what keeps operating cash profit growing faster than sales next year.
New. Net income is set to rise 50.0% at the middle of the range over the 2026 outlook, lifting the net income margin from about 9% to about 12% and diluted profit per share by 48.4% to $0.95. The rebound happens because 2026's inventory step-up charges do not repeat and operating profit outgrows fixed interest costs.
New. At the middle of the range ($1.66), profit per share excluding one-offs and acquired amortization grows 20.3% over the 2026 outlook midpoint of $1.38. That is slower than the 48.4% jump in reported diluted profit per share because the non-GAAP measure already strips out acquisition amortization in both years.
New. For 2027, the company forecasts net interest expense edging up $3 million to about $83 million, depreciation staying at about $15 million, and intangible amortization rising $2 million to about $67 million. Those figures include a full twelve months of Harper Engineering, which closed in January 2026.
❓ Key Questions
How much did new product wins add to Q3 sales?
Sales from businesses owned a year ago accelerated from 12.3% in Q2 to 15.8% in Q3. Management has not disclosed how much of that gain came from converting its $750 million new-business pipeline versus price increases or Beadlight entering the base.
Did underlying defense sales return to growth in Q3?
Total defense sales jumped 58.2% to $45.5 million with LMB included, but underlying defense sales shrank 8.1% in the first half. Without the quarterly filing's organic breakdown, investors cannot see if legacy defense orders have recovered.
Why does 2027 interest expense rise to $83 million?
Loar generated $39.4 million of free cash flow in Q3 by our math and ended September with $159.3 million in cash. Projecting $83 million of interest in 2027, up from $80 million in 2026, raises the question of why debt is not being paid down.
Has airline aftermarket destocking ended?
Management previously noted that airlines trimmed spare-parts inventories from 5–7 months of supply to 3–5 months. The release gives no pro forma aftermarket growth rate, leaving open whether airline ordering has normalised ahead of a tough fourth-quarter comparison.