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Ducommun (DCO)
NYSE:DCO
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Ducommun
(NYSE:DCO)
64Neutral
Positive Factors
Financial performance
DCO has a plan to expand its operating margins significantly over the medium-term, with recent results showing substantial progress on this front.
Growth outlook
DCO is expected to benefit from its exposure to aerospace original equipment as the OEMs ramp up production significantly to meet strong demand.
Valuation
The stock is one of the least expensive in the aerospace supply chain on key valuation metrics.
Negative Factors
Acquisition strategy
Building an acquisition compounder model since 2017 could pose risks if accretive deployment does not meet expectations.
Market valuation
DCO trades at only 7.8X 2025 EV/EBITDA, which is lower compared to peers like TGI (8.4X) and HXL (13.5X), and significantly below the highest quality aftermarket-rich suppliers in the 17-20X range.
Ducommun (DCO) vs. S&P 500 (SPY)
Market Cap
$869.36M
Dividend YieldN/A
Average Volume (3M)82.32K
Price to Earnings (P/E)28.0
Beta (1Y)0.82
Revenue Growth3.90%
EPS Growth81.41%
CountryUS
Employees2,180
SectorIndustrials
Sector Strength65
IndustryAerospace & Defense
Share Statistics
EPS (TTM)2.10
Shares Outstanding14,863,345
10 Day Avg. Volume83,265
30 Day Avg. Volume82,322
Financial Highlights & Ratios
PEG Ratio0.34
Price to Book (P/B)N/A
Price to Sales (P/S)1.11
Price to Cash Flow (P/CF)11.80
P/FCF Ratio11.90
Enterprise Value/Market CapN/A
Enterprise Value/RevenueN/A
Enterprise Value/Gross ProfitN/A
Enterprise Value/EbitdaN/A
Forecast
1Y Price Target
$77.00Price Target Upside31.18% Upside
Rating ConsensusModerate Buy
Number of Analyst Covering2
Ducommun Business Overview & Revenue Model
Company DescriptionDucommun Incorporated (DCO) is a prominent provider of innovative manufacturing solutions, serving primarily the aerospace, defense, and industrial markets. Headquartered in Santa Ana, California, the company specializes in the design, engineering, and manufacturing of complex electronic and structural systems, including fuselage components, wings, and other critical aerospace structures, as well as intricate electronic assemblies and subsystems.
How the Company Makes MoneyDucommun generates revenue by leveraging its expertise in engineering and manufacturing to deliver high-quality aerospace and defense products and services. The company's primary revenue streams include the sale of structural components and electronic systems to major aerospace and defense contractors, as well as providing aftermarket support and services. Ducommun's strategic partnerships with industry leaders in both the commercial and defense sectors enhance its market presence and contribute significantly to its earnings. The company's focus on innovation and quality ensures a steady demand for its products and services, while its long-term contracts with key customers provide financial stability and growth opportunities.
Ducommun Financial Statement Overview
Summary
Overall, Ducommun demonstrates solid financial performance with consistent revenue growth and improved profitability. The company maintains strong equity and capital management, ensuring financial stability. Cash flow generation is robust, although there is potential to enhance the conversion of earnings into free cash flow. The financial position is strong, with room for growth in profitability and cash efficiency.Income Statement
Ducommun's revenue has shown consistent growth with a 3.9% increase from the previous year. The gross profit margin improved to 25.1% in the most recent annual report, indicating efficient cost management. Net profit margin increased to 4.0%, showing improved profitability. However, the EBIT margin is relatively moderate at 6.6%, and the EBITDA margin is stable at 6.6% due to depreciation and amortization effects.78
Positive
Balance Sheet
The company maintains a healthy equity ratio of 60.6%, reflecting a strong capital structure. The debt-to-equity ratio has improved significantly, reducing to a low level, showing effective leverage management. Return on Equity (ROE) has improved to 4.6%, signaling improved efficiency in using equity to generate profits. The balance sheet shows robust financial stability despite moderate leverage.72
Positive
Cash Flow
Free cash flow increased by 73.7% year-on-year, indicating strong cash generation capability. The operating cash flow to net income ratio stands at 1.09, showing that cash earnings align well with net income. However, the free cash flow to net income ratio of 0.64 suggests room for improvement in converting profits into free cash flow.70
Positive
| Breakdown | ||||
| Dec 2024 | Dec 2023 | Dec 2022 | Dec 2021 | Dec 2020 |
|---|---|---|---|---|
| Income Statement | Total Revenue | |||
| 786.55M | 756.99M | 712.54M | 645.41M | 628.94M | Gross Profit |
| 197.26M | 163.19M | 144.30M | 142.46M | 137.74M | EBIT |
| 52.21M | 28.92M | 19.93M | 48.88M | 19.21M | EBITDA |
| 52.21M | 69.72M | 83.58M | 213.41M | 76.78M | Net Income Common Stockholders |
| 31.50M | 15.93M | 28.79M | 135.54M | 29.17M |
| Balance Sheet | Cash, Cash Equivalents and Short-Term Investments | |||
| 37.14M | 42.86M | 46.25M | 76.32M | 56.47M | Total Assets |
| 1.13B | 1.12B | 1.02B | 978.74M | 837.35M | Total Debt |
| 42.31M | 295.59M | 282.84M | 320.59M | 336.61M | Net Debt |
| 5.18M | 252.73M | 236.59M | 244.28M | 280.14M | Total Liabilities |
| 443.57M | 484.82M | 495.55M | 504.13M | 508.01M | Stockholders Equity |
| 682.53M | 636.09M | 525.96M | 474.60M | 329.33M |
| Cash Flow | Free Cash Flow | |||
| 20.05M | 11.54M | 12.99M | -17.43M | 101.00K | Operating Cash Flow |
| 34.18M | 31.07M | 32.68M | -565.00K | 12.61M | Investing Cash Flow |
| -13.91M | -133.50M | -19.24M | 57.75M | -5.47M | Financing Cash Flow |
| -26.00M | 99.05M | -43.51M | -37.34M | 9.74M |
Ducommun Technical Analysis
Negative
58.70
Price Trends
61.98
Negative
63.62
Negative
62.97
Negative
Market Momentum
-0.74
Negative
41.70
Neutral
29.02
Neutral
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For DCO, the sentiment is Negative. The current price of 58.7 is below the 20-day moving average (MA) of 58.88, below the 50-day MA of 61.98, and below the 200-day MA of 62.97, indicating a bearish trend. The MACD of -0.74 indicates Negative momentum. The RSI at 41.70 is Neutral, neither overbought nor oversold. The STOCH value of 29.02 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for DCO.
Ducommun Risk Analysis
Ducommun disclosed 38 risk factors in its most recent earnings report. Ducommun reported the most risks in the “Finance & Corporate” category.
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
Latest Risks Added 0 New Risks
Ducommun Peers Comparison
Overall Rating
UnderperformOutperform
Sector (62)
Financial Indicators
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
76 Outperform | $23.34B | 29.01 | 8.73% | ― | 0.53% | -7.18% | |
75 Outperform | $12.14B | 30.55 | 16.95% | 0.26% | 9.69% | 14.65% | |
65 Neutral | $4.40B | 34.39 | 8.14% | 1.13% | 6.31% | 28.25% | |
64 Neutral | $869.36M | 27.98 | 4.78% | ― | 3.90% | 81.41% | |
63 Neutral | $871.93M | ― | -6.41% | ― | 15.41% | 43.28% | |
62 Neutral | $8.08B | 13.63 | 3.82% | 3.13% | 3.58% | -14.35% | |
40 Underperform | $4.02B | ― | 81.63% | ― | 4.44% | -202.63% |
* Industrials Sector Average
Performance Comparison
DCO
Ducommun
55.96
7.49
15.45%
ATRO
Astronics
24.62
6.92
39.10%
CW
Curtiss-Wright
325.77
70.87
27.80%
HXL
Hexcel
56.08
-14.06
-20.05%
SPR
Spirit AeroSystems
32.39
-1.64
-4.82%
TDY
Teledyne Technologies
499.68
82.83
19.87%
Ducommun Earnings Call Summary
Earnings Call Date: Feb 27, 2025 | % Change Since: -4.34% | Next Earnings Date: May 1, 2025
Earnings Call Sentiment Positive
The earnings call reflected strong and consistent revenue growth, particularly in the military and commercial aerospace sectors, with improved margins and a robust defense backlog. However, there were challenges with Boeing and Spirit's lower build rates, as well as a decline in non-core industrial business and mixed margins in Structural Systems.Highlights
Consistent Revenue Growth
Ducommun reported its 15th consecutive quarter of year-over-year revenue growth, with a 2.6% increase to $197.3 million in Q4 2024.
Military and Space Revenue Increase
Military and space revenue grew by 5% over the prior year, with significant contributions from missile and electronic warfare programs.
Commercial Aerospace Growth
The A220 program grew more than 40% during Q4, and the commercial aerospace sector saw a 4% year-over-year increase, marking 14 consecutive quarters of growth.
Improved Gross Margins
Gross margins increased by 180 basis points to 23.5% in Q4 2024, driven by strategic pricing initiatives and productivity improvements.
Strong Defense Backlog
The company's defense backlog increased by $98 million year-over-year, reaching $625 million.
Significant Order in Europe
Ducommun secured a major order from Bayern-Chemie, valued at over $40 million, for cabling solutions supporting NATO and the Patriot PAC-2 missile.
Lowlights
Challenges with Boeing and Spirit
Destocking and lower build rates at Boeing and Spirit resulted in revenue challenges, affecting commercial aerospace performance.
Industrial Business Decline
Non-core industrial business revenue declined by 24% in 2024, as part of a strategic pruning initiative.
Mixed Margins in Structural Systems
Structural Systems experienced a decline in operating margins due to unfavorable program mix and one-time costs.
Company Guidance
During Ducommun's Q4 2024 earnings call, the company provided guidance for the upcoming year, projecting mid-single-digit growth in 2025. This growth is expected to be driven by a recovery in commercial aerospace volumes and continued strength in the military and space sectors. The call highlighted Ducommun's Vision 2027 strategy, which aims for 18% EBITDA margins, with 2024 margins already at 14.8%, up 140 basis points year-over-year. The company also achieved a significant milestone with engineered product revenue contributing 23% of total revenue, up from 19% in 2023, positioning Ducommun close to its 2027 target of 25%. The fiscal year 2024 saw record revenues of $786 million, a 3.9% increase, driven by an 8% growth in commercial aerospace despite Boeing production challenges. The defense backlog increased by $98 million year-over-year to $625 million, with strong performance across missile and electronic warfare programs. Gross margins improved to 23.5%, and adjusted EBITDA grew by $4.3 million to 13.8%, reflecting strategic pricing and productivity initiatives. The company plans to capitalize on expected volume recovery and newly certified revenue programs in 2025, with a focus on the second half of the year showing renewed strength.Ducommun Corporate Events
Executive/Board ChangesBusiness Operations and Strategy
Ducommun Strengthens Board Amid Leadership Changes
Positive
Nov 7, 2024
Ducommun Incorporated has appointed Daniel G. Korte and Daniel L. Boehle to its Board of Directors, bringing expertise in aerospace and defense to support its VISION 2027 Strategy. As part of a broader board refreshment, these appointments aim to enhance Ducommun’s operational and financial capabilities, contributing to its ongoing growth and shareholder value. The company also expressed gratitude to retiring directors Robert C. Ducommun and Dean M. Flatt for their pivotal roles in the company’s transformation.
Glossary
OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.
NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.
UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.