Breaking Down Ducommun Incorporated (DCO) Financial Health: Key Insights for Investors

You might have seen the headline about Ducommun Incorporated's latest earnings, and honestly, the GAAP net loss of a staggering $(64.4) million for the third quarter of 2025 looks like a disaster, but you have to look past the one-time noise. That massive loss is almost entirely due to the $99.7 million litigation settlement charge, which masks a genuinely robust operational quarter. The real story is the record net revenue of $212.6 million, a 6% jump year-over-year, plus the non-GAAP adjusted earnings per share (EPS) of $0.99, which actually beat analyst estimates. The defense sector is doing the heavy lifting-the company's book-to-bill ratio, which is a key indicator of future revenue, hit a strong 1.6x, setting a new record for remaining performance obligations, so the underlying demand is defintely there even as commercial aerospace remains soft. This is a classic case of a temporary financial hit obscuring a clear strategic win, and it's why analysts hold a 'Moderate Buy' consensus with a 12-month price target averaging around $97.50. Let's break down what this means for your portfolio.

Revenue Analysis

You need to know if Ducommun Incorporated (DCO) can keep growing its top line, and the short answer is yes, but it's a two-speed story. The company's 2025 revenue growth is defintely being driven by a surging defense business, which is successfully compensating for the anticipated softness in commercial aerospace demand.

For the third quarter of 2025, Ducommun Incorporated reported a net revenue of $212.6 million, marking a solid 6% year-over-year (YoY) increase. This pushes the last twelve months (LTM) revenue, as of September 27, 2025, to approximately $806.22 million, representing a 3.16% growth over the prior LTM period. Here's the quick math: the defense sector is the engine pulling the train right now.

Segment Contribution and Primary Sources

Ducommun Incorporated operates across two main segments, Electronic Systems and Structural Systems, both of which serve the Military and Space and Commercial Aerospace end-use markets. The Electronic Systems segment consistently contributes the larger share of the overall revenue, which is a key factor in understanding the company's margin profile.

The primary revenue sources are products and services for military and space platforms-like missiles and radar-and commercial aircraft. For Q3 2025, the breakdown shows how much each segment contributed to the total $212.6 million in net revenue:

Electronic Systems, which focuses on high-performance components and sub-assemblies, saw its Q3 revenue jump to $123.1 million from $115.4 million in Q3 2024. Structural Systems, which handles complex metallic and composite aerostructures, also grew, posting $89.5 million in Q3 2025.

Analyzing the Revenue Stream Shift

The most significant change in Ducommun Incorporated's revenue mix in 2025 is the stark divergence between its defense and commercial markets. In Q3 2025, the Military and Space end-use market grew by a strong 13% YoY, fueled by higher rates on programs for selected missiles, military rotorcraft, and fixed-wing aircraft. This strength is a direct result of increased global defense spending and Ducommun Incorporated's positioning on key platforms.

But, the Commercial Aerospace business remains a headwind. You saw lower revenues from major platforms like the Boeing 737 MAX and certain commercial in-flight entertainment products in Q1 2025, and continued weakness across large commercial and business jets in Q3. The company is mitigating this, though, by focusing on its higher-margin work and benefiting from its U.S.-centric manufacturing base, where over 95% of its revenue is generated.

For a deeper dive into who is betting on this defense-led growth, you should read Exploring Ducommun Incorporated (DCO) Investor Profile: Who's Buying and Why?

The near-term action is clear: watch the commercial aerospace recovery closely. While the defense strength is a great anchor, a faster ramp-up in commercial production rates, like the FAA's decision allowing Boeing to increase 737 MAX production, will be the catalyst for the next leg of revenue growth.

• Defense drives growth: Military/Space revenue up 13% in Q3 2025.
• Commercial lags: Weakness across large commercial and business jets.
• Industrial is minor: Q3 saw a small $5 million increase from last-time buys.

Profitability Metrics

You want to know if Ducommun Incorporated (DCO) is making money efficiently, and honestly, the 2025 numbers show a clear, deliberate push toward higher margins. This isn't just luck; it's a structural improvement driven by their strategic shift to defense and specialized products, despite some expected turbulence in commercial aerospace.

The core of DCO's story in 2025 is the gross margin. They hit a record-setting 26.6% gross margin for three consecutive quarters-Q1, Q2, and Q3 2025. This is a significant jump from the full-year 2024 gross margin of 25.1%, showing that cost management and product mix are defintely working.

Here's a quick snapshot of the key profitability ratios for the first three quarters of 2025, which gives you the clearest picture of their operational health before one-time events:

The 26.6% gross margin is a new quarterly record, achieved through favorable product mix and higher manufacturing volume, which is exactly what you want to see from an aerospace and defense component manufacturer. This operational efficiency is a direct result of their VISION 2027 plan to focus on higher-margin engineered products.

Near-Term Risks and Industry Comparison

Now, let's talk about the net profit margin, which requires a critical caveat. While Q1 2025 net income was $10.5 million (a 5.4% margin) and Q2 2025 was $12.6 million (a 6.2% margin), the Q3 2025 GAAP results show a net loss of $(64.4) million. This looks terrible on paper, but it was driven by a single, non-recurring $99.7 million litigation settlement charge. The core business is still strong: the non-GAAP adjusted net income for Q3 was $15.2 million.

When you compare DCO's operational performance to the industry, they are competitive but have room to grow. For the Trailing Twelve Months (TTM) leading up to Q3 2025, DCO's gross margin of 25.86% is just shy of the industry TTM average of 27.3%. Their TTM operating margin of 8.46% is also below the industry average of 10.75%.

• Gross Margin: DCO's 26.6% (Q3 2025) is near the TTM industry average of 27.3%.
• Operating Margin: DCO's TTM 8.46% trails the industry average of 10.75%.
• Net Margin: The TTM net profit margin of 5.03% is lower than the industry's 7.51%.

The gap between DCO's gross margin and its operating/net margins is where you need to focus. It suggests that while they are managing the cost of goods sold (COGS) well, their selling, general, and administrative (SG&A) expenses are still a bit high compared to peers, even when factoring out the massive Q3 litigation cost. This is the next frontier for them to close the gap on industry-leading profitability. You can find more detail on this in the full post: Breaking Down Ducommun Incorporated (DCO) Financial Health: Key Insights for Investors.

The action item here is clear: Watch the Q4 2025 results to see if the 26.6% gross margin holds, and if the operating margin starts to climb toward the 10% mark without the one-time Q3 noise. If they can keep the gross margin high and improve SG&A, the stock will definitely react.

Debt vs. Equity Structure

You need to know how Ducommun Incorporated (DCO) funds its operations and growth, because the mix of debt versus equity tells you a lot about risk and management's confidence. The good news is that Ducommun Incorporated runs a relatively conservative balance sheet compared to its peers, relying more on shareholder capital than borrowed money.

As of the third quarter of fiscal year 2025 (ending September 27, 2025), the company's total debt stood at approximately $228.1 million. This is a manageable level, especially when you break down the components of that debt.

• Short-term debt (current portion of long-term debt) is only $12.5 million.
• Long-term debt (net of current portion and issuance costs) is the bulk, at $215.05 million.

The company's reliance on debt has been trending down, which is a positive signal for investors. Here's the quick math on their leverage.

Debt-to-Equity: A Healthy Margin of Safety

The core metric here is the debt-to-equity (D/E) ratio, which shows how much debt a company uses for every dollar of shareholder equity (the book value of ownership). Ducommun Incorporated's D/E ratio, calculated from its Q3 2025 financials, is approximately 0.351. This means for every dollar of equity, the company has about 35 cents of debt.

That's a defintely solid number. To be fair, you need to compare it to the industry. The average D/E ratio for the Aerospace & Defense sector as of November 2025 is around 0.38. Ducommun Incorporated is operating below the industry average, suggesting a lower financial risk profile and a stronger equity cushion against market downturns. This is a sign of disciplined management.

Here is a snapshot of the key figures:

Refinancing and Funding Strategy

The company's current financing structure stems from a strategic refinancing move in July 2022, which locked in favorable terms and extended maturities. They replaced their old debt with a new credit facility, comprising a $250 million term loan and a $200 million revolving line of credit, both of which now mature in July 2027. This move eliminated the need to refinance debt that would have matured this month, in November 2025, removing a near-term risk.

This debt is variable-rate, but the company has used interest rate swaps to manage that exposure. Plus, they've been successful in lowering their borrowing costs; the weighted-average interest rate on their debt dropped to 6.11% as of September 27, 2025, down from 7.25% at the end of 2024. The general strategy is clear: use a modest amount of debt for growth and working capital, but keep a large equity base. This balance is critical for a company in the cyclical aerospace and defense business, where cash flow can fluctuate. The last publicly available credit rating from S&P Global Ratings in November 2021 affirmed a 'B+' rating with a Positive outlook, reflecting expectations for their debt-to-EBITDA ratio to improve below 4x.

To understand the ownership side of this equation, you should read Exploring Ducommun Incorporated (DCO) Investor Profile: Who's Buying and Why?

Liquidity and Solvency

Ducommun Incorporated (DCO) shows a solid, albeit slightly reduced, near-term liquidity position as of the third quarter of 2025, with a key caveat around a major litigation settlement. You need to focus on the company's strong operating cash flow generation, which is the real engine here, but defintely keep an eye on the timing of that large cash outflow.

Assessing Ducommun Incorporated (DCO)'s Liquidity

The company's primary liquidity metrics remain healthy, indicating it can cover its short-term obligations. The Current Ratio, which measures current assets against current liabilities, stands at a strong 2.04 as of the September 2025 quarter (TTM). This means Ducommun Incorporated has over two dollars in current assets for every dollar of current liabilities. The Quick Ratio (or acid-test ratio), which excludes inventory-a less liquid asset-is also robust at 1.46. Generally, anything over 1.0 is a good sign for immediate liquidity.

Here's the quick math on liquidity ratios:

• Current Ratio: 2.04 (Strong position, but down from the historical average of 2.79).
• Quick Ratio: 1.46 (Excellent short-term coverage without selling inventory).

Working Capital Trends and Cash Flow Overview

Working capital trends are showing improvement, which is directly translating into stronger cash flow from operations. Net cash provided by operations (CFO) for the first nine months of 2025 totaled approximately $41.3 million, a significant increase over the comparable period last year. This improvement stems from better management of working capital components, specifically a smaller increase in inventories and contract assets, plus an increase in accounts payable.

The overall cash flow statement for the first nine months of 2025 paints a clearer picture of capital allocation:

The company is generating enough cash from its operations to cover capital expenditures and pay down debt, which is a sign of financial discipline. You can dive deeper into the business drivers in our analysis, Exploring Ducommun Incorporated (DCO) Investor Profile: Who's Buying and Why?

Potential Liquidity Concerns or Strengths

The major near-term liquidity concern is the 2025 third-quarter net loss of $(64.4) million. This loss was almost entirely driven by a non-cash charge of $99.7 million for a litigation settlement and related costs. The critical detail is that this cash has not yet been paid, so it didn't impact the Q3 2025 cash balance or the reported operating cash flow of $18.1 million. The strength is the underlying business performance, evidenced by the positive CFO and the debt reduction initiatives, which have lowered interest expense to $2.9 million in Q3 2025 from $3.8 million in Q3 2024. The risk, however, is that the settlement payment will become a material cash outflow in the coming quarters, which will significantly impact free cash flow when it is eventually paid. This is a timing issue you must track.

Next step: Financial Planning needs to model the exact timing and payment schedule for the $99.7 million settlement against projected quarterly CFO to assess the true impact on the cash balance.

Valuation Analysis

You're looking for a clear signal on Ducommun Incorporated (DCO)-is this aerospace and defense supplier priced for perfection, or is there still runway? The short answer is that DCO appears fully valued at its current price, but analyst consensus still maps out a defintely achievable near-term upside. We're seeing a classic growth-story valuation: high multiples driven by strong operational execution, especially in the defense sector.

The core valuation metrics tell a story of premium pricing. Based on the most recent data from November 2025, Ducommun Incorporated's trailing Price-to-Earnings (P/E) ratio sits around 33.74x. This is a significant premium to the broader market, suggesting investors are baking in substantial future growth. For context, the Price-to-Book (P/B) ratio is also elevated at a forecasted 2.17x for the 2025 fiscal year, showing the market values the company well above its net asset value.

Here's the quick math on the Enterprise Value-to-EBITDA (EV/EBITDA) multiple, which is a better comparison tool since it strips out capital structure differences:

• Current EV/EBITDA (as of November 2025) is 14.46x.
• Historically, DCO's median EV/EBITDA over the last decade was closer to 11.78x.

This 14.46x multiple is high, but to be fair, it reflects the company's recent Q3 2025 adjusted EBITDA margin expansion to 16.2%. You are paying a premium for that improved profitability.

Stock Performance and Analyst Sentiment

The stock's recent performance validates the premium. Over the last 12 months leading up to November 2025, Ducommun Incorporated's stock price has climbed by a strong 34.97%. The 52-week trading range shows a massive move from a low of $51.76 to a high of $101.47. The current price of around $88.51 (as of November 19, 2025) is closer to the high, which means any investment decision today needs to be predicated on continued operational outperformance, not a cheap entry point.

A key factor to note is the lack of a dividend. Ducommun Incorporated has a 0.00% dividend yield and no payout ratio to speak of, as it hasn't paid a regular dividend in many years. This is a growth-focused company, so capital is being reinvested into the business, which is exactly what you want to see if you're looking for capital appreciation, not income.

Analyst consensus remains favorable, which provides a solid floor for the stock. The average recommendation from seven brokerages is a Moderate Buy, with an average 12-month price target of $97.50. This target suggests an upside of about 10.27% from the current $88.51 price.

If the company continues to execute on its VISION 2027 margin goals, that $97.50 target is well within reach.

The table below summarizes the key valuation and consensus data you need to factor into your model for Breaking Down Ducommun Incorporated (DCO) Financial Health: Key Insights for Investors.

Next Step: Check the Q4 2025 earnings guidance for any shifts in their defense vs. commercial aerospace mix, as that product mix is driving the margin expansion.

Risk Factors

You need to look past Ducommun Incorporated (DCO)'s record quarterly revenue in Q3 2025 to see the real risks. While the company's defense business is booming, a massive, one-time financial hit and a persistent commercial aerospace slowdown are the two major factors to watch.

The most immediate financial risk is the $99.7 million charge for a litigation settlement and related costs recorded in the third quarter of 2025. This single event drove the company to a GAAP net loss of $64.4 million for the quarter, despite strong operational performance. While this is a non-recurring item, it's a huge cash outlay that impacts the balance sheet and cash flow, and it's a stark reminder of legal and operational risk exposure.

The core operational risk is the uneven demand across Ducommun's two main segments. The defense sector is a powerhouse, with the military and space end-use markets driving the Q3 2025 net revenue increase of 6% to $212.6 million. But the commercial aerospace business, which makes up 40% of sales, is struggling.

• Commercial aerospace destocking is a major headwind.
• Q3 2025 commercial aerospace revenue was down $8.1 million year-over-year.
• Q1 2025 saw an $8.2 million revenue reduction, partly due to lower sales on platforms like the Boeing 737 MAX.

This weakness means the company is heavily reliant on the robust growth of its defense and missile franchises to meet its full-year 2025 mid-single-digit revenue growth guidance. That's a good hedge, but it's not defintely a long-term solution to segment imbalance.

Mitigation and Strategic Focus

To be fair, Ducommun is actively mitigating several external and internal risks. Their defense-heavy focus (military & space is 57% of sales) is a strategic buffer against commercial cyclicality. Plus, the company has a massive demand pipeline, shown by a record book-to-bill ratio of 1.6x in Q3 2025 and a total backlog of $1,135.7 million as of September 27, 2025.

On the external front, the risk from tariffs and trade disputes is largely contained. The company states that over 95% of its revenue is derived from U.S. domestic facilities. Raw material tariff exposures are managed through duty exemptions on military products or by simply passing the costs through to customers under existing contract terms. This is smart risk management.

The strategic plan, VISION 2027, is designed to reduce margin risk by focusing on higher-value engineered products, with a goal of achieving an 18% Adjusted EBITDA margin. The Q3 2025 Adjusted EBITDA margin of 16.2% shows they are on pace, which is a key measure of operational improvement. Here's a quick look at the core risks and mitigation strategies:

If you want a deeper dive into the company's performance metrics, you can read the full analysis at Breaking Down Ducommun Incorporated (DCO) Financial Health: Key Insights for Investors.

Your next step should be to model the impact of a sustained commercial aerospace downturn against the projected growth in the defense segment through 2026.

Growth Opportunities

You're looking for where Ducommun Incorporated (DCO) will find its next leg of growth, and the answer is clear: the defense sector is carrying the load right now, but margin expansion and a commercial aerospace rebound are the real long-term catalysts. The company's strategic plan, VISION 2027, isn't just a marketing slogan; it's a roadmap targeting net revenues of $950 million to $1 billion by 2027, which is a solid 6-7% compound annual growth rate (CAGR) from 2022 levels. That's a defintely achievable goal if they execute.

The immediate growth driver is the robust demand from the military and space markets. This segment saw a 13% revenue increase in the third quarter of 2025, and the missile business alone is up a staggering 27% year-to-date in 2025. Ducommun is a key supplier on over a dozen major missile platforms-think AMRAAM, PAC-3, and Tomahawk-so the global need for inventory replenishment and FMS (Foreign Military Sales) order activity directly translates to their top line. This is where the company's strength as a Tier 1 supplier to giants like RTX and Lockheed Martin really pays off.

Beyond defense, the strategy focuses on operational efficiency and a shift to higher-margin products. Here's the quick math on their margin expansion efforts:

• Engineered Products Focus: Revenue from engineered products and aftermarket content now stands at 23% this year, a significant jump from 15% in 2022.
• Cost Savings: Consolidating manufacturing from higher-cost sites in California and Arkansas to lower-cost facilities, including their Guaymas, Mexico plant, is projected to generate $11 million to $13 million in annual savings.
• Profitability Target: Adjusted EBITDA margin hit 16.2% in Q3 2025, keeping them on track for the VISION 2027 goal of 18%.

The commercial aerospace market, while currently a headwind due to destocking and lower rates on platforms like the Boeing 737 MAX, is a coiled spring. The recent FAA decision to approve an increase in Boeing's 737 production cap to 42 aircraft per month is a huge positive; it will help burn down inventory in the system, which should translate to new orders for Ducommun's components down the line. Plus, their strong Q3 2025 book-to-bill ratio of 1.6 times-a new record for remaining performance obligations-signals strong near-term demand visibility across the board.

A key competitive advantage is Ducommun Incorporated's supply chain resilience. About 95% of their revenue is generated from U.S. operations, which largely insulates them from the tariff and trade volatility that plagues many multinational peers. They also maintain a focused acquisition program, targeting approximately $75 million+ in revenue from new additions by 2027 to expand their product offerings and market reach.

To get a deeper understanding of the company's long-term philosophy, you should review their Mission Statement, Vision, & Core Values of Ducommun Incorporated (DCO).

Looking at the full-year picture, consensus estimates for fiscal year 2025 revenue are around $826.69 million, with an estimated EPS of $3.64. This table breaks down the segment performance that drives this growth:

The next concrete step for you is to model the impact of the $11 million to $13 million in annual savings on their 2026 earnings per share (EPS) forecast, which analysts already project will grow 13.08% to $3.63 per share.