Ducommun’s second quarter results were met with a negative market reaction, despite the company surpassing Wall Street’s revenue and profit expectations. Management cited robust growth in its defense segment, particularly in missiles and radar systems, which offset ongoing challenges in commercial aerospace stemming from persistent inventory destocking by major customers like Boeing and Spirit AeroSystems. CEO Stephen Oswald emphasized, “Our missile business is up 39% in the second quarter, and our missile backlog also increased 30% compared to the year ago.” Management also acknowledged the continued impact of destocking on commercial aerospace and highlighted efforts to mitigate these effects through facility consolidation and strategic product portfolio growth.
Is now the time to buy DCO? Find out in our full research report (it’s free).
Ducommun (DCO) Q2 CY2025 Highlights:
- Revenue: $202.3 million vs analyst estimates of $199.6 million (2.7% year-on-year growth, 1.3% beat)
- Adjusted EPS: $0.88 vs analyst estimates of $0.82 (7% beat)
- Adjusted EBITDA: $32.41 million vs analyst estimates of $30.97 million (16% margin, 4.6% beat)
- Operating Margin: 8.5%, up from 7.1% in the same quarter last year
- Backlog: $1.02 billion at quarter end, down 4.7% year on year
- Market Capitalization: $1.38 billion
While we enjoy listening to the management's commentary, our favorite part of earnings calls are the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.
Our Top 5 Analyst Questions From Ducommun’s Q2 Earnings Call
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Noah Poponak (Goldman Sachs) asked about visibility into the end of commercial aerospace destocking and whether the Q4 growth outlook assumes a full recovery. CFO Suman Mookerji replied that destocking is likely to persist through year-end, with only gradual improvement expected.
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Ken Herbert (RBC Capital Markets) questioned the trajectory for engineered product mix and M&A pipeline. Mookerji and CEO Stephen Oswald indicated the engineered mix will likely remain steady this year, with potential for ramping in 2026, and described the M&A pipeline as competitive but promising.
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Michael Crawford (B. Riley Securities) inquired about the viability of engineered products as a stand-alone business and its synergies. Mookerji emphasized that while the business is managed independently, there are significant synergies with core operations, and expanding scale remains a key focus.
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Sam Struhsaker (Truist Securities) sought clarity on the cadence of commercial aerospace destocking and sustainability of Electronic Systems margins. Mookerji explained that destocking continues but progress is being made, and margin improvements were aided by favorable mix, not necessarily a new baseline.
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George Anthony Bancroft (GAMCO Investors) asked about long-term strategic vision and the next phase of growth. Oswald highlighted the intent to further increase the engineered product and aftermarket mix and pursue cost efficiencies as part of a multi-year strategy.
Catalysts in Upcoming Quarters
In future quarters, we will be monitoring (1) the pace of commercial aerospace recovery as Boeing and Spirit AeroSystems work through inventory, (2) progress on facility consolidations and realization of targeted cost savings, and (3) the growth trajectory of defense and engineered product platforms. Additionally, the StockStory team will track Ducommun’s ability to capitalize on M&A opportunities and the scaling of new production lines, such as Apache rotor blades.
Ducommun currently trades at $92.36, in line with $91.65 just before the earnings. Is the company at an inflection point that warrants a buy or sell? The answer lies in our full research report (it’s free).
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