Loar Holdings (LOAR) raised its 2025 guidance when it reported Q4 results, however, there is still potential for further growth beyond the current projections, RBC Capital Markets said in a note Monday.

Analysts, including Ken Herbert, said management has raised its expectations for revenue, adjusted earnings before interest, taxes, depreciation, and amortization, and adjusted earnings per share in 2025. The analysts believe this increase is due to "better" demand in the aftermarket sector, positive tailwinds in defense, and improved productivity.

"Although the macro backdrop for air travel has softened," RBC analysts said they believe the company "will continue to benefit from multiple tailwinds."

The analysts said their positive outlook on Loar is based on several key points. First, the aerospace company generates 85% of its 2024 revenue from proprietary products, which allows the company to "benefit from strong pricing tailwinds." Second, it achieved 36.3% adjusted EBITDA margins in 2024, with a "high" visibility for continued margin growth. They added that Loar's "disciplined" approach to mergers and acquisitions will remain a key factor for stock growth. The company also generates about 70% of its EBITDA from the aftermarket, according to the note.

The analysts said that Loar's upcoming acquisition of LMB will boost its presence in the expanding European defense market, and any additional mergers and acquisitions would likely drive the stock higher.

RBC reiterated an outperform rating on the stock with a $92 price target.

Price: 69.73, Change: -0.92, Percent Change: -1.30