Ducommun (DCO)

Aerospace and defense company Ducommun (NYSE:DCO) missed Wall Street’s revenue expectations in Q4 CY2025, but sales rose 9.4% year on year to $215.8 million. Its non-GAAP profit of $1.05 per share was 8.9% above analysts’ consensus estimates.

Company Overview

California’s oldest company, Ducommun (NYSE:DCO) is a provider of engineering and manufacturing services for high-performance products primarily within the aerospace and defense industries.

Aerospace companies often possess technical expertise and have made significant capital investments to produce complex products. It is an industry where innovation is important, and lately, emissions and automation are in focus, so companies that boast advances in these areas can take market share. On the other hand, demand for aerospace products can ebb and flow with economic cycles and geopolitical tensions, which can be particularly painful for companies with high fixed costs.

Ducommun’s peers and competitors include Virgin Galactic (NSYE:SPCE) and Park Aerospace (NYSE:PKE)

A company’s long-term sales performance can indicate its overall quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul. Regrettably, Ducommun’s sales grew at a tepid 5.6% compounded annual growth rate over the last five years. This fell short of our benchmark for the industrials sector and is a rough starting point for our analysis.

We at StockStory place the most emphasis on long-term growth, but within industrials, a half-decade historical view may miss cycles, industry trends, or a company capitalizing on catalysts such as a new contract win or a successful product line. Ducommun’s recent performance shows its demand has slowed as its annualized revenue growth of 4.4% over the last two years was below its five-year trend. We’re wary when companies in the sector see decelerations in revenue growth, as it could signal changing consumer tastes aided by low switching costs.

Ducommun also reports its backlog, or the value of its outstanding orders that have not yet been executed or delivered. Ducommun’s backlog reached $576.4 million in the latest quarter and averaged 27.8% year-on-year declines over the last two years. Because this number is lower than its revenue growth, we can see the company hasn’t secured enough new orders to maintain its growth rate in the future.

This quarter, Ducommun’s revenue grew by 9.4% year on year to $215.8 million, missing Wall Street’s estimates.

Looking ahead, sell-side analysts expect revenue to grow 9% over the next 12 months, an improvement versus the last two years. This projection is above average for the sector and indicates its newer products and services will fuel better top-line performance.

Ducommun was profitable over the last five years but held back by its large cost base. Its average operating margin of 3.7% was weak for an industrials business.

Analyzing the trend in its profitability, Ducommun’s operating margin decreased by 11.5 percentage points over the last five years. This raises questions about the company’s expense base because its revenue growth should have given it leverage on its fixed costs, resulting in better economies of scale and profitability. Ducommun’s performance was poor no matter how you look at it - it shows that costs were rising and it couldn’t pass them onto its customers.

This quarter, Ducommun generated an operating margin profit margin of 6.5%, up 1.2 percentage points year on year. This increase was a welcome development and shows it was more efficient.

We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

Ducommun’s unimpressive 6.6% annual EPS growth over the last five years aligns with its revenue performance. This tells us it maintained its per-share profitability as it expanded.

Like with revenue, we analyze EPS over a shorter period to see if we are missing a change in the business.

Ducommun’s two-year annual EPS growth of 20.8% was fantastic and topped its 4.4% two-year revenue growth.

We can take a deeper look into Ducommun’s earnings to better understand the drivers of its performance. Ducommun’s operating margin has expanded over the last two years. This was the most relevant factor (aside from the revenue impact) behind its higher earnings; interest expenses and taxes can also affect EPS but don’t tell us as much about a company’s fundamentals.

In Q4, Ducommun reported adjusted EPS of $1.05, up from $0.75 in the same quarter last year. This print beat analysts’ estimates by 8.9%. Over the next 12 months, Wall Street expects Ducommun’s full-year EPS of $3.75 to grow 17.8%.

Free cash flow isn't a prominently featured metric in company financials and earnings releases, but we think it's telling because it accounts for all operating and capital expenses, making it tough to manipulate. Cash is king.

Ducommun has shown poor cash profitability over the last five years, giving the company limited opportunities to return capital to shareholders. Its free cash flow margin averaged 1.6%, lousy for an industrials business.

Taking a step back, an encouraging sign is that Ducommun’s margin expanded by 9.7 percentage points during that time. The company’s improvement shows it’s heading in the right direction, and we can see it became a less capital-intensive business because its free cash flow profitability rose while its operating profitability fell.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? A company’s ROIC explains this by showing how much operating profit it makes compared to the money it has raised (debt and equity).

Ducommun historically did a mediocre job investing in profitable growth initiatives. Its five-year average ROIC was 2.6%, lower than the typical cost of capital (how much it costs to raise money) for industrials companies.

We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. On average, Ducommun’s ROIC decreased by 2.2 percentage points annually each year over the last few years. Paired with its already low returns, these declines suggest its profitable growth opportunities are few and far between.

Ducommun reported $45.29 million of cash and $345.8 million of debt on its balance sheet in the most recent quarter. As investors in high-quality companies, we primarily focus on two things: 1) that a company’s debt level isn’t too high and 2) that its interest payments are not excessively burdening the business.

With $135.6 million of EBITDA over the last 12 months, we view Ducommun’s 2.2× net-debt-to-EBITDA ratio as safe. We also see its $5.72 million of annual interest expenses as appropriate. The company’s profits give it plenty of breathing room, allowing it to continue investing in growth initiatives.

We were impressed by how significantly Ducommun blew past analysts’ EBITDA expectations this quarter. We were also glad its EPS outperformed Wall Street’s estimates. On the other hand, its revenue slightly missed. Overall, we think this was a decent quarter with some key metrics above expectations. The stock remained flat at $126.77 immediately following the results.

Updated: February 26, 2026 at 6:29 AM EST

When considering an investment in Ducommun, investors should account for its valuation and business qualities as well as what’s happened in the latest quarter.

Ducommun isn’t a terrible business, but it doesn’t pass our quality test. For starters, its revenue growth was uninspiring over the last five years. While its rising cash profitability gives it more optionality, the downside is its relatively low ROIC suggests management has struggled to find compelling investment opportunities. On top of that, its declining operating margin shows the business has become less efficient.

Ducommun’s P/E ratio based on the next 12 months is 28.7x. Beauty is in the eye of the beholder, but our analysis shows the upside isn’t great compared to the potential downside. We're fairly confident there are better investments elsewhere.

Wall Street analysts have a consensus one-year price target of $130 on the company (compared to the current share price of $126.77).