Aerospace and defense company Ducommun (NYSE:DCO) reported Q2 CY2025 results beating Wall Street’s revenue expectations, with sales up 2.7% year on year to $202.3 million. Its non-GAAP profit of $0.88 per share was 7% above analysts’ consensus estimates.
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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
- Free Cash Flow Margin: 9%, up from 0.1% in the same quarter last year
- Backlog: $1.02 billion at quarter end, down 4.7% year on year
- Market Capitalization: $1.36 billion
“Another excellent quarter for Ducommun as we continue to make solid progress towards our VISION 2027 goals with both gross margin and Adjusted EBITDA margin and dollars at record levels. Net revenue grew 3% to $202.3 million as anticipated, led by strength in our defense business which offset the continued headwinds in commercial aerospace OEM demand,” said Stephen G. Oswald, chairman, president and chief executive officer.
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.
Revenue Growth
Examining a company’s long-term performance can provide clues about its quality. Even a bad business can shine for one or two quarters, but a top-tier one grows for years. Unfortunately, Ducommun’s 2.9% annualized revenue growth over the last five years was sluggish. This was below our standards and is a poor baseline for our analysis.
Long-term growth is the most important, but within industrials, a half-decade historical view may miss new industry trends or demand cycles. Ducommun’s annualized revenue growth of 3.4% over the last two years aligns with its five-year trend, suggesting its demand was consistently weak. 
Ducommun also reports its backlog, or the value of its outstanding orders that have not yet been executed or delivered. Ducommun’s backlog reached $1.02 billion in the latest quarter and averaged 3.8% year-on-year growth over the last two years. Because this number is in line with its revenue growth, we can see the company effectively balanced its new order intake and fulfillment processes. 
This quarter, Ducommun reported modest year-on-year revenue growth of 2.7% but beat Wall Street’s estimates by 1.3%.
Looking ahead, sell-side analysts expect revenue to grow 8.2% over the next 12 months, an improvement versus the last two years. This projection is above average for the sector and suggests its newer products and services will catalyze better top-line performance.
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Operating Margin
Ducommun’s operating margin has been trending up over the last 12 months and averaged 6.3% over the last five years. The company’s higher efficiency is a breath of fresh air, but its suboptimal cost structure means it still sports paltry profitability for an industrials business.
Analyzing the trend in its profitability, Ducommun’s operating margin might fluctuated slightly but has generally stayed the same 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.
This quarter, Ducommun generated an operating margin profit margin of 8.5%, up 1.4 percentage points year on year. This increase was a welcome development and shows it was more efficient.
Earnings Per Share
Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.
Ducommun’s EPS grew at an unimpressive 5.4% compounded annual growth rate over the last five years. On the bright side, this performance was better than its 2.9% annualized revenue growth and tells us the company became more profitable on a per-share basis as it expanded.
Like with revenue, we analyze EPS over a more recent period because it can provide insight into an emerging theme or development for the business.
For Ducommun, its two-year annual EPS growth of 7.6% was higher than its five-year trend. Accelerating earnings growth is almost always an encouraging data point.
In Q2, Ducommun reported adjusted EPS at $0.88, up from $0.83 in the same quarter last year. This print beat analysts’ estimates by 7%. Over the next 12 months, Wall Street expects Ducommun’s full-year EPS of $3.45 to grow 17.9%.
Key Takeaways from Ducommun’s Q2 Results
We were impressed by how significantly Ducommun blew past analysts’ adjusted operating income expectations this quarter. We were also glad its EBITDA outperformed Wall Street’s estimates. Zooming out, we think this was a solid print. The market seemed to be hoping for more, and the stock traded down 1% to $90.70 immediately after reporting.
Big picture, is Ducommun a buy here and now? If you’re making that decision, you should consider the bigger picture of valuation, business qualities, as well as the latest earnings. We cover that in our actionable full research report which you can read here, it’s free.