Aerospace and defense company Ducommun (NYSE: DCO) fell short of the market’s revenue expectations in Q4 CY2025, but sales rose 9.4% year on year to $215.8 million. Its non-GAAP profit of $1.05 per share was 8.9% above analysts’ consensus estimates.

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“We continued to make excellent progress to close out year three of our five year VISION 2027 with gross margin and Adjusted EBITDA margins at record levels along with Engineered Products at 23% of our revenue mix. In addition, I am very happy to report that in 2025, the Company set a new record for revenue for the third consecutive year, exceeding $800 million for the first time, and getting to $825 million for 2025. In Q4, net revenue grew 9.4% to a new quarterly record of $215.8 million, led by our military and space business,” 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

A company’s long-term performance is an indicator of its overall quality. Any business can have short-term success, but a top-tier one grows for years. Unfortunately, Ducommun’s 5.6% annualized revenue growth over the last five years was tepid. This fell short of our benchmark for the industrials sector 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 recent performance shows its demand has slowed as its annualized revenue growth of 4.4% over the last two years was below its five-year trend. We’re wary when companies in the sector see decelerations in revenue growth, as it could signal changing consumer tastes aided by low switching costs.

Ducommun also reports its backlog, or the value of its outstanding orders that have not yet been executed or delivered. Ducommun’s backlog reached $576.4 million in the latest quarter and averaged 27.8% year-on-year declines over the last two years. Because this number is lower than its revenue growth, we can see the company hasn’t secured enough new orders to maintain its growth rate in the future.

This quarter, Ducommun’s revenue grew by 9.4% year on year to $215.8 million, missing Wall Street’s estimates.

Looking ahead, sell-side analysts expect revenue to grow 9% over the next 12 months, an improvement versus the last two years. This projection is above average for the sector and implies its newer products and services will spur better top-line performance.

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Operating Margin

Ducommun was profitable over the last five years but held back by its large cost base. Its average operating margin of 3.7% was weak for an industrials business.

Analyzing the trend in its profitability, Ducommun’s operating margin decreased by 11.5 percentage points 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. Ducommun’s performance was poor no matter how you look at it - it shows that costs were rising and it couldn’t pass them onto its customers.

In Q4, Ducommun generated an operating margin profit margin of 6.5%, up 1.2 percentage points year on year. This increase was a welcome development and shows it was more efficient.

Earnings Per Share

We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

Ducommun’s unimpressive 6.6% annual EPS growth over the last five years aligns with its revenue performance. This tells us it maintained its per-share profitability 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.

Ducommun’s two-year annual EPS growth of 20.8% was fantastic and topped its 4.4% two-year revenue growth.

We can take a deeper look into Ducommun’s earnings quality to better understand the drivers of its performance. Ducommun’s operating margin has expanded over the last two years. This was the most relevant factor (aside from the revenue impact) behind its higher earnings; interest expenses and taxes can also affect EPS but don’t tell us as much about a company’s fundamentals.

In Q4, Ducommun reported adjusted EPS of $1.05, up from $0.75 in the same quarter last year. This print beat analysts’ estimates by 8.9%. Over the next 12 months, Wall Street expects Ducommun’s full-year EPS of $3.75 to grow 17.8%.

Key Takeaways from Ducommun’s Q4 Results

We were impressed by how significantly Ducommun blew past analysts’ EBITDA expectations this quarter. We were also glad its EPS outperformed Wall Street’s estimates. On the other hand, its revenue slightly missed. Overall, we think this was a solid quarter with some key areas of upside. The stock remained flat at $126.77 immediately after reporting.

Big picture, is Ducommun a buy here and now? When making that decision, it’s important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here (it’s free).