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DUCOMMUN INC /DE/ (DCO)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 2024 delivered modest top-line growth with net revenue at $197.3M (+2.6% YoY), while margin expansion vs prior year continued; sequentially, revenue and margins stepped down from Q3’s records due to mix and one-time costs in Structures .
  • Adjusted EBITDA grew 19% YoY to $27.3M (13.8% margin), but declined sequentially from Q3’s $31.9M (15.8%); GAAP diluted EPS was $0.45 and adjusted EPS $0.75 .
  • Backlog ended above $1.0B; defense backlog rose ~+$98M YoY to ~$625M, supported by offloading initiatives and new FMS-related awards (e.g., Bayern‑Chemie Patriot harness order) .
  • Management guided mid-single-digit revenue growth for FY 2025, flattish Q1, better Q2, and stronger H2 on Boeing/Airbus recovery and restructuring-driven productivity, pointing to margin progress toward Vision 2027 targets .
  • Stock narrative catalysts: defense backlog strength, European defense opportunity, Boeing MAX/787 content gains and H2 production stabilization; near-term headwinds include destocking at Spirit/Boeing and Structures mix/one-time expenses .

What Went Well and What Went Wrong

What Went Well

  • Engineered Products mix shift and strategic pricing drove YoY margin expansion: gross margin 23.5% (+180 bps YoY) and adjusted EBITDA margin 13.8% (+180 bps YoY). “We continued to deliver on our VISION 2027 Plan of shifting to more engineered products, executing strategic pricing initiatives…” (CEO) .
  • Defense momentum and backlog: Q4 military/space revenue grew $5.1M YoY; defense backlog up ~$98M YoY to ~$625M. “Strong growth in our missile and electronic warfare programs… defense backlog increased $98 million…” (CEO) .
  • Interest savings from hedge and lower debt boosted earnings: interest expense fell to $3.6M from $5.4M YoY; hedge pegging 1‑month SOFR at 170 bps on $150M delivered ~$1.8M Q4 savings (CFO) .

What Went Wrong

  • Structures mix and one-time charges hurt margins: Structural Systems operating margin fell to 3.6% (vs 7.7% prior year) due to unfavorable mix, Monrovia shutdown charges; adjusted margin 9.2% (vs 14.6% prior year) .
  • Industrial pruning reduced revenue: Industrial end-market revenue decreased ~$3.1M YoY as non-core business was selectively pruned .
  • MAX/Spirit destocking and Boeing strike impacts: sequential commercial backlog decreased and near-term shipments faced headwinds. “First half… destocking headwinds in Spirit… second half is going to be better than the first.” (CEO) .

Financial Results

Summary Financials (Quarterly)

MetricQ2 2024Q3 2024Q4 2024
Revenue ($USD Millions)$197.0 $201.4 $197.3
GAAP Diluted EPS ($)$0.52 $0.67 $0.45
Adjusted Diluted EPS ($)$0.83 $0.99 $0.75
Gross Margin %26.0% 26.2% 23.5%
Operating Income %7.1% 7.6% 5.3%
Adjusted EBITDA ($USD Millions)$29.973 $31.884 $27.304
Adjusted EBITDA Margin %15.2% 15.8% 13.8%
Net Income ($USD Millions)$7.724 $10.148 $6.774

Segment Performance (Quarterly)

SegmentQ2 2024 Revenue ($M)Q2 OI Margin %Q3 2024 Revenue ($M)Q3 OI Margin %Q4 2024 Revenue ($M)Q4 OI Margin %
Electronic Systems$101.4 16.6% $115.4 16.4% $107.0 17.7%
Structural Systems$95.6 11.0% $86.0 9.6% $90.3 3.6%

KPIs and Balance/Backlog

KPIQ2 2024Q3 2024Q4 2024
Cash from Operations ($M)$3.5 $13.9 $18.4
Backlog Total ($M)$1,068.0 $1,043.9 $1,060.8
Backlog – Military & Space ($M)$592.5 $591.6 $624.8
Backlog – Commercial Aero ($M)$451.1 $430.7 $415.9
Backlog – Industrial ($M)$24.5 $21.5 $20.1
Long-Term Debt (less current) ($M)$250.9 $246.0 $229.8

Results vs Estimates

  • Wall Street consensus via S&P Global could not be retrieved during this session due to API limits; therefore, estimate comparisons are unavailable for Q2–Q4 2024. Future comparisons will default to S&P Global consensus when accessible [GetEstimates error].

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Revenue GrowthFY 2025N/AMid-single-digit growth; flattish Q1, better Q2, stronger H2 on Boeing recovery and program certifications New
Quarterly OutlookQ1 2025N/AFlattish vs prior year; destocking at Spirit/Boeing New
Restructuring Expense Remaining2025 completion$2–3M remaining (as of Q3) ~$1.0–$1.5M remaining (as of Q4) Lowered
Interest Expense2025Hedge savings to continue; 1‑month SOFR pegged at 170 bps on $150M debt MaintainedMaintained
CapexMulti‑year~$20M annual run-rate (discussed Q3) ~$20M annual run-rate Maintained
EBITDA Long‑Term TargetVision 202718% target 18% target; FY 2024 at 14.8% Maintained

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 2024)Previous Mentions (Q3 2024)Current Period (Q4 2024)Trend
Boeing/Spirit MAX headwindsBuffer builds; MAX uncertainty; positioned for recovery Strike impact; destocking; sequential backlog down H1 2025 destocking; H2 stabilization; shipments improving Jan→Feb Improving in H2 2025
Engineered Products mix & pricingDriving margin expansion; adjusted GM up Record margins, continued mix shift 23% of revenue in 2024; continued pricing strength Positive
Defense offloading/FMSSPY‑6 card growth; TOW pause then resume 2025 Defense backlog up; content with primes (NOC) Defense backlog +$98M YoY; Bayern‑Chemie Patriot order Positive
Restructuring & facility transfersMonrovia/Berryville wind-down; $11–$13M savings target Additional $2–$3M expected; benefits in 2025–26 Remaining $1.0–$1.5M; savings to ramp late 2025–26 Nearing completion
Supply chain/working capitalLong lead times; strategic inventory; plan to unwind Inventory reduced $16M in Q3; cash/liquidity strong Lower Q4 CFO vs Q3 YoY; focus on working capital and cash Improving gradually
Commercial program performanceA220 growth; business jets; rotorcraft A220/A320 up; MAX weak; 787 share shift ahead Airbus growth; S‑92 rotorcraft strong; Boeing weak near term Mixed near term, better in H2

Management Commentary

  • “We made excellent progress in our VISION 2027 commitments… reaching 23% of revenue for Engineered Products… another record full year revenue… Gross margins… 25.1%, another all‑time record.” — Stephen G. Oswald, CEO .
  • “Strong growth in our missile and electronic warfare programs… defense backlog increased $98 million… feel great about what lies ahead… including FMS.” — CEO .
  • “The hedge resulted in interest savings of approximately $1.8 million in Q4 2024 and will continue to drive significant interest cost savings in 2025 and beyond.” — Suman B. Mookerji, CFO .
  • “Adjusted operating income margins in Q4… 8.2%… adjusted EBITDA… exceeding $27 million… expansion of 180 basis points… working towards the 18% goal in our Vision 2027 plan.” — CEO .
  • “Structural Systems operating margin decline was driven by unfavorable program mix and one‑time costs… margins expected to fully recover in Q1.” — CFO .

Q&A Highlights

  • 2025 outlook and mix: H1 commercial aerospace constrained by Spirit/Boeing destocking; defense growth more even through the year; H2 commercial recovery expected .
  • Europe defense momentum: Bayern‑Chemie Patriot order >$40M cabling through 2030; early but promising direct European exposure beyond U.S. primes .
  • Structures margins: Roughly half of the Q4 margin decline due to one-time expenses; mix impacts expected to fade; margins to recover in Q1 .
  • Legal/professional fees: $0.738M in Q4 and $3.145M FY for unsolicited acquisition offer; not expected to recur in 2025 after selling shareholder’s 13G indicated exit .
  • Capex and capacity: Structural plants have capacity without heavy shifts; capex around $20M annually; Electronics expansions are modest and not capital intensive .

Estimates Context

  • Consensus EPS and revenue estimates from S&P Global for Q4 2024 and prior quarters were unavailable during retrieval due to API limits; as a result, explicit beat/miss vs Street cannot be assessed here. Future recaps will anchor comparisons to S&P Global consensus when accessible [GetEstimates error].

Key Takeaways for Investors

  • Margin resiliency: Despite Structures headwinds, company delivered YoY margin expansion on the back of Engineered Products mix and pricing — favor stocks positioned for margin mix improvements in A&D .
  • Defense backlog strength de‑risks near term: ~$625M defense backlog and FMS awards (Bayern‑Chemie) support revenue visibility as commercial normalizes .
  • H2 2025 commercial catalyst: Management expects Boeing stability and Airbus growth to lift H2 revenue; watch for MAX/787 content gains and program certifications .
  • Interest expense tailwind: Hedge locks favorable base rate on $150M debt, reducing interest cost — supports EPS and cash flow in 2025 .
  • Restructuring nearing inflection: Remaining $1.0–$1.5M charges; savings ramp late 2025–26 — monitor margin trajectory, particularly Structures .
  • Cash generation: Q4 CFO $18.4M; ongoing working capital unwind targeted; improved inventory discipline should benefit FCF over time .
  • Trading stance: Near term, stock may be sensitive to Boeing/Spirit headlines and Structures margin prints; medium term, defense backlog, engineered products mix, and Vision 2027 milestones are constructive for multiple and earnings trajectory .