Ducommun Inc /De/ (DCO) Stock Analysis and Metrics

Ducommun

NYSE: DCO

$172.51 ▼ -7.44 (-4.13%)

At close: Jul 8, 2026 · 3:59 PM UTC

Financial Ratios

Market Cap2.86 Bn

P/E-82.77

P/S3.41

Div. Yield0.00

ROIC (Qtr)0.00

Total Debt (Qtr)302.61 Mn

Revenue Growth (1y) (Qtr)8.59

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About

Ducommun Incorporated is a leading designer and manufacturer of high performance products for aerospace and defense industrial medical and other markets. The company provides manufacturing solutions that include electronic systems structural systems and integrated solutions. Its core activities focus on creating reliable components and assemblies for high cost of failure applications.

Ducommun generates revenue primarily through the sale of its electronic and structural products and related engineering services. Electronic Systems supplies cable assemblies interconnect systems printed circuit board assemblies lightning diversion systems and other high reliability electronic components. Structural Systems provides aerostructure components bonded metal and composite structures ammunition handling systems seals and aerodynamic systems. The majority of sales come from aerospace and defense customers which accounted for 96% of net revenues in 2025 with the remainder serving industrial medical and other end use markets.

The company operates through the following segments: Electronic Systems and Structural Systems.

• Electronic Systems: This segment designs engineers and manufactures high reliability electronic and electromechanical products such as complex cable assemblies interconnect systems printed circuit board assemblies higher level electronic components lightning diversion systems and related engineering services for aerospace defense industrial and medical applications.

• Structural Systems: This segment designs engineers and manufactures complex contoured aerostructure components assemblies bonded metal and composite structures ammunition handling systems seals and aerodynamic systems serving commercial and military aircraft military ground vehicles and space programs.

Ducommun positions itself as a value added supplier that competes with Tier One Tier Two and Tier Three providers in the aerospace and defense sectors. The company differentiates itself by offering complex assemblies and integrated solutions rather than simple components. Its competitive advantages stem from broad technical capabilities high quality products strong customer relationships and the ability to meet stringent performance requirements. While it faces competition from large domestic and international firms Ducommun leverages its niche expertise in electronics and structures to maintain a stable market position.

Ducommun's customer base consists mainly of aerospace original equipment manufacturers defense contractors commercial airlines leasing companies and industrial medical firms. Its largest customers in 2025 were Boeing which accounted for 13% of net revenues and RTX Corporation which contributed 18%. The top ten customers together generated 61% of total net revenues. The company also serves the U. S. Government through various defense and space contracts.

Investment Thesis

▲ Bull case

Ducommun's defense business is positioned for significant multi-year growth driven by the U.S. Department of War's 7-year missile framework agreements with defense primes, which management explicitly stated are expected to drive production increases of "several fold" on key programs like Tomahawk, PAC-3, and Standard Missile 3 and 6, with the company noting it is "well positioned as an incumbent supplier" and that these agreements represent a catalyst not yet reflected in its current backlog or bookings, creating a hidden pipeline of future revenue that could substantially exceed current expectations as production ramps in 2027 and beyond, particularly given its involvement in over a dozen missile platforms and its strategic focus on increasing engineered product content, which rose to 23% of revenue over the past year through organic growth and value-added pricing initiatives.
The company's commercial aerospace recovery is stronger than currently appreciated, with first-quarter revenue growing 18% year-over-year to $84 million, fueled by higher-than-anticipated OEM production rates and lower-than-expected destocking, and management indicated that the destocking headwind—particularly at legacy Spirit Max fuselage operations in Wichita—is expected to dissipate by year-end, setting the stage for a snap-back effect where commercial aerospace volumes must catch up to OEM build rates, which are increasing (e.g., Boeing 737 MAX from 42 to 47 per month by summer, with further ramp to 50+ in 2027), and Ducommun's $150 per shipset content on the MAX platform positions it to benefit disproportionately from each additional aircraft produced, turning what the market views as a temporary drag into a powerful near-term catalyst.
Ducommun's balance between defense and commercial aerospace provides structural resilience, with defense growing at 4.8% year-over-year in Q1 (missiles up 22%) and commercial aerospace surging at 18%, creating a diversified revenue stream that reduces reliance on any single market, while the company's facility consolidation program is on track to deliver $13 million in annual cost savings by end-2026, with synergies continuing to build through 2026 as production ramps on relocated lines, and these savings—combined with strategic pricing initiatives and productivity improvements—are driving gross margin expansion (26.9% vs. 26.2% prior year) and adjusted EBITDA margin improvement (16.9% vs. 13% in 2022), putting the company ahead of its Vision 2027 goal of 18% adjusted EBITDA margin and signaling operational efficiency that could support sustained margin expansion even if revenue growth moderates.
The company's strong liquidity position—$384 million in available liquidity at quarter-end, comprising unutilized revolver and cash on hand—and its amended credit facility ($650 million total, including $200 million term loan and $450 million revolver) lower its cost of capital and provide incremental capacity to pursue its disciplined acquisition strategy, with management acknowledging it has been "actively engaged" in pursuing opportunities and "gotten close on a number" over the last 18 months, suggesting that while past acquisition attempts stalled due to valuation discipline, the current financial flexibility and focus on value-creating deals could soon yield a transaction that enhances engineered product mix and growth prospects beyond organic initiatives, which have already driven the engineered product revenue share from 15% to 23% since 2022.
Ducommun's backlog remains robust, with remaining performance obligations (RPOs) exceeding $1.1 billion—up $86 million year-over-year—and primarily driven by defense, where the book-to-bill ratio is 1.2x over the last 12 months, indicating that orders are outpacing revenue recognition and creating a growing pipeline of future work, especially in high-growth missile programs, and this growing backlog, combined with the company's incumbent status on major defense primes' platforms and its readiness to support ramp-ups without requiring near-term capacity expansion (as it has underutilized footprint and shift availability), positions it to capture significant upside as defense production accelerates, a catalyst the market may be underestimating due to the lag between order recognition and revenue realization.

Ducommun's defense business is positioned for significant multi-year growth driven by the U.S. Department of War's 7-year missile framework agreements with defense primes, which management explicitly stated are expected to drive production increases of "several fold" on key programs like Tomahawk, PAC-3, and Standard Missile 3 and 6, with the company noting it is "well positioned as an incumbent supplier" and that these agreements represent a catalyst not yet reflected in its current backlog or bookings, creating a hidden pipeline of future revenue that could substantially exceed current expectations as production ramps in 2027 and beyond, particularly given its involvement in over a dozen missile platforms and its strategic focus on increasing engineered product content, which rose to 23% of revenue over the past year through organic growth and value-added pricing initiatives.
The company's commercial aerospace recovery is stronger than currently appreciated, with first-quarter revenue growing 18% year-over-year to $84 million, fueled by higher-than-anticipated OEM production rates and lower-than-expected destocking, and management indicated that the destocking headwind—particularly at legacy Spirit Max fuselage operations in Wichita—is expected to dissipate by year-end, setting the stage for a snap-back effect where commercial aerospace volumes must catch up to OEM build rates, which are increasing (e.g., Boeing 737 MAX from 42 to 47 per month by summer, with further ramp to 50+ in 2027), and Ducommun's $150 per shipset content on the MAX platform positions it to benefit disproportionately from each additional aircraft produced, turning what the market views as a temporary drag into a powerful near-term catalyst.
Ducommun's balance between defense and commercial aerospace provides structural resilience, with defense growing at 4.8% year-over-year in Q1 (missiles up 22%) and commercial aerospace surging at 18%, creating a diversified revenue stream that reduces reliance on any single market, while the company's facility consolidation program is on track to deliver $13 million in annual cost savings by end-2026, with synergies continuing to build through 2026 as production ramps on relocated lines, and these savings—combined with strategic pricing initiatives and productivity improvements—are driving gross margin expansion (26.9% vs. 26.2% prior year) and adjusted EBITDA margin improvement (16.9% vs. 13% in 2022), putting the company ahead of its Vision 2027 goal of 18% adjusted EBITDA margin and signaling operational efficiency that could support sustained margin expansion even if revenue growth moderates.
The company's strong liquidity position—$384 million in available liquidity at quarter-end, comprising unutilized revolver and cash on hand—and its amended credit facility ($650 million total, including $200 million term loan and $450 million revolver) lower its cost of capital and provide incremental capacity to pursue its disciplined acquisition strategy, with management acknowledging it has been "actively engaged" in pursuing opportunities and "gotten close on a number" over the last 18 months, suggesting that while past acquisition attempts stalled due to valuation discipline, the current financial flexibility and focus on value-creating deals could soon yield a transaction that enhances engineered product mix and growth prospects beyond organic initiatives, which have already driven the engineered product revenue share from 15% to 23% since 2022.
Ducommun's backlog remains robust, with remaining performance obligations (RPOs) exceeding $1.1 billion—up $86 million year-over-year—and primarily driven by defense, where the book-to-bill ratio is 1.2x over the last 12 months, indicating that orders are outpacing revenue recognition and creating a growing pipeline of future work, especially in high-growth missile programs, and this growing backlog, combined with the company's incumbent status on major defense primes' platforms and its readiness to support ramp-ups without requiring near-term capacity expansion (as it has underutilized footprint and shift availability), positions it to capture significant upside as defense production accelerates, a catalyst the market may be underestimating due to the lag between order recognition and revenue realization.

▼ Bear case

Ducommun's optimism regarding the timing of missile framework agreement-driven revenue may be premature, as management acknowledged that while order activity could begin in the second half of 2026, revenue recognition from these programs is likely delayed until late 2027 or beyond, with Suman Mookerji noting that "from an orders perspective, yes, late this year, into next this year, into next year," and Stephen G. Oswald suggesting that margin benefits and volume impacts may not materialize until "end of year early 27," meaning the market may be pricing in near-term growth from defense spending increases that will not translate into tangible financial results for another 12–18 months, creating a risk of disappointment if near-term guidance does not reflect this lag.
The company's commercial aerospace recovery remains fragile and susceptible to renewed destocking pressures, particularly as Boeing's 787 production ramp to 10 per month by year-end and its South Carolina facility investments could reignite supply chain imbalances, and while management expects destocking to dissipate by year-end, they also admitted that Q1's strength was partly due to a "pull forward" of revenue from lower-than-anticipated destocking, which creates a tougher comparison in subsequent quarters, and any resurgence in inventory correction—especially at legacy Spirit operations or with Airbus as it works through engine issues—could quickly reverse the recent 18% year-over-year growth, leaving the commercial segment vulnerable to cyclical downturns despite near-term optimism.
Ducommun's dependence on a few key defense primes, particularly RTX (Raytheon) as its largest customer, introduces concentration risk, as management conceded that "the big companies move a little bit slower than maybe any of us would like," and while the company is well positioned as an incumbent, any delays in program execution, specification changes, or shifts in defense spending priorities could disproportionately impact its missile and radar franchise, which already represents approximately 19% of total revenue and is critical to its long-term growth thesis, leaving it vulnerable to execution risks beyond its control despite its strong positioning.
The company's engineered product revenue growth, while improving from 15% to 23% over the past few years, remains heavily reliant on organic initiatives rather than acquisitions, with management admitting they have been "picky eaters" in M&A and have not completed a transformative deal in over three years since the BLR Aerospace acquisition, and while this discipline avoids overpaying, it also means the company may be missing opportunities to accelerate its engineered product mix shift and diversify beyond its current organic pace, which could limit its ability to reach higher-margin, less cyclical revenue streams as quickly as investors might hope, especially if organic growth plateaus or faces margin pressure from rising input costs or wage inflation.
Ducommun's interest rate hedge, while currently providing savings by pegging 1-month LIBOR at 170 basis points for $150 million of debt starting January 2024, is set to expire in 2031, but any unexpected rise in interest rates before the hedge's full term or challenges in renewing it could increase interest expense, which rose year-over-year in Q1 due to higher debt balances, and while the amended credit facility lowers the cost of capital, the company's reliance on debt to fund working capital and potential acquisitions leaves it exposed to macroeconomic shifts, particularly if elevated interest rates persist or increase, potentially constraining financial flexibility despite current liquidity of $384 million.

Ducommun's optimism regarding the timing of missile framework agreement-driven revenue may be premature, as management acknowledged that while order activity could begin in the second half of 2026, revenue recognition from these programs is likely delayed until late 2027 or beyond, with Suman Mookerji noting that "from an orders perspective, yes, late this year, into next this year, into next year," and Stephen G. Oswald suggesting that margin benefits and volume impacts may not materialize until "end of year early 27," meaning the market may be pricing in near-term growth from defense spending increases that will not translate into tangible financial results for another 12–18 months, creating a risk of disappointment if near-term guidance does not reflect this lag.
The company's commercial aerospace recovery remains fragile and susceptible to renewed destocking pressures, particularly as Boeing's 787 production ramp to 10 per month by year-end and its South Carolina facility investments could reignite supply chain imbalances, and while management expects destocking to dissipate by year-end, they also admitted that Q1's strength was partly due to a "pull forward" of revenue from lower-than-anticipated destocking, which creates a tougher comparison in subsequent quarters, and any resurgence in inventory correction—especially at legacy Spirit operations or with Airbus as it works through engine issues—could quickly reverse the recent 18% year-over-year growth, leaving the commercial segment vulnerable to cyclical downturns despite near-term optimism.
Ducommun's dependence on a few key defense primes, particularly RTX (Raytheon) as its largest customer, introduces concentration risk, as management conceded that "the big companies move a little bit slower than maybe any of us would like," and while the company is well positioned as an incumbent, any delays in program execution, specification changes, or shifts in defense spending priorities could disproportionately impact its missile and radar franchise, which already represents approximately 19% of total revenue and is critical to its long-term growth thesis, leaving it vulnerable to execution risks beyond its control despite its strong positioning.
The company's engineered product revenue growth, while improving from 15% to 23% over the past few years, remains heavily reliant on organic initiatives rather than acquisitions, with management admitting they have been "picky eaters" in M&A and have not completed a transformative deal in over three years since the BLR Aerospace acquisition, and while this discipline avoids overpaying, it also means the company may be missing opportunities to accelerate its engineered product mix shift and diversify beyond its current organic pace, which could limit its ability to reach higher-margin, less cyclical revenue streams as quickly as investors might hope, especially if organic growth plateaus or faces margin pressure from rising input costs or wage inflation.
Ducommun's interest rate hedge, while currently providing savings by pegging 1-month LIBOR at 170 basis points for $150 million of debt starting January 2024, is set to expire in 2031, but any unexpected rise in interest rates before the hedge's full term or challenges in renewing it could increase interest expense, which rose year-over-year in Q1 due to higher debt balances, and while the amended credit facility lowers the cost of capital, the company's reliance on debt to fund working capital and potential acquisitions leaves it exposed to macroeconomic shifts, particularly if elevated interest rates persist or increase, potentially constraining financial flexibility despite current liquidity of $384 million.

Segments Breakdown of Revenue (2025)

Peer Comparison

Companies in the Aerospace & Defense

S.No.	Ticker	Company	Market Cap	P/E	P/S	Total Debt (Qtr)
1	BA	Boeing Co	1,106.33 Bn	575.32	12.00	47.21 Bn
2	RTX	RTX Corp	258.51 Bn	34.01	2.86	33.20 Bn
3	GD	General Dynamics Corp	174.86 Bn	40.28	3.25	8.01 Bn
4	LMT	Lockheed Martin Corp	119.99 Bn	25.03	1.60	20.70 Bn
5	HWM	Howmet Aerospace Inc.	107.26 Bn	61.54	12.44	4.69 Bn
6	TDG	TransDigm Group INC	76.18 Bn	40.87	8.02	31.28 Bn
7	NOC	Northrop Grumman Corp /De/	73.88 Bn	16.14	1.74	14.41 Bn
8	RKLB	Rocket Lab Corp	60.59 Bn	-331.77	89.15	0.00 Bn

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Investment Thesis

Segments Breakdown of Revenue (2025)

Segments Breakdown of Revenue (2025)

Peer Comparison

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Investment Thesis

Segments Breakdown of Revenue (2025)

Segments Breakdown of Revenue (2025)

Peer Comparison

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