Ducommun Q3 Revenue Rises 6% as Commercial Aerospace Grows 28%

Ducommun Inc. (NYSE: DCO) reported record third-quarter revenue and margins as a 28% increase in commercial aerospace sales offset a temporary decline in military and space revenue. The aerospace and defense manufacturer also reiterated its 2026 revenue outlook, saying it expects full-year sales toward the upper end of its previously provided range.

Revenue rose 6% year over year to $227.0 million in the third quarter of 2026 from $214.4 million. Commercial aerospace revenue increased to $97 million, while military and space revenue fell 7% to $119 million because of production timing.

Gross margin reached a record 28.9%, up 140 basis points from a year earlier. GAAP operating income was $25.8 million, compared with a $75.3 million operating loss in the prior-year quarter, which included $99.7 million of litigation settlement and related costs. Adjusted operating income increased to $28.0 million from $27.2 million, though adjusted operating margin declined to 12.3% from 12.7%.

GAAP net income was $13.9 million, or $0.89 per diluted share, compared with a net loss of $60.8 million, or $4.06 per share, a year earlier. Adjusted net income was unchanged at $18.8 million, while adjusted earnings per share slipped to $1.21 from $1.22. Third-quarter 2026 adjustments included a $3.9 million pension plan settlement loss and $2.2 million of acquisition-related amortization.

Adjusted EBITDA rose to $39.7 million from $37.4 million. The adjusted EBITDA margin edged up to 17.5% from 17.4%, moving closer to Ducommun’s VISION 2027 target of about 18%.

Commercial aerospace drives revenue growth

Commercial aerospace revenue climbed 28% year over year to $97 million, extending sequential growth from $89 million in the second quarter. Ducommun said destocking at Boeing was unwinding through the fourth quarter, while a new aftermarket award for the 737 contributed to growth in the current period and is expected to support future sales.

Structural Systems revenue increased 9.3% to $97.4 million. Growth in large commercial aircraft programs, including the 737 MAX and A320, and higher missile-related revenue partly offset temporary weakness in military rotorcraft.

The segment’s GAAP operating income declined 2.2% to $11.9 million, with margin contracting 140 basis points to 12.3%. Adjusted operating income fell 5.4% to $13.8 million, and adjusted margin decreased 220 basis points to 14.2%. Ducommun said facility-consolidation synergies and a higher engineered-products mix were flowing through its results, and it remains positioned across major commercial aircraft programs for planned production-rate increases.

Electronic Systems revenue rose 3.5% to $129.6 million. Commercial aerospace, missiles and military fixed-wing aircraft generated higher sales, partly offset by temporary weakness in radar and other platforms. GAAP operating income increased 23.5% to $28.7 million, lifting margin by 360 basis points to 22.2%. Adjusted operating income rose 22.7% to $29.1 million, while adjusted margin reached 22.5%, up 350 basis points, as higher volume and operating leverage supported profitability.

Orders provide visibility despite defense timing decline

Third-quarter bookings totaled $354.3 million, producing a book-to-bill ratio of 1.6. For the 12 months through the third quarter, bookings were $1.13 billion and the book-to-bill ratio was 1.3.

Remaining performance obligations increased 25% year over year to a record $1.29 billion from $1.03 billion. Defense accounted for $868 million of the total, compared with $404 million for commercial aerospace and $14 million for industrial markets.

Military and space revenue declined to $119 million from $128 million because of production timing, but the business recorded a third-quarter book-to-bill ratio of 2.2. Ducommun said it is an incumbent supplier on several missile programs covered by long-term U.S. Department of War framework agreements with major defense contractors. Management expects planned production expansion across those programs to support defense growth in 2027 and beyond.

Ducommun reiterates 2026 outlook

Ducommun maintained its full-year 2026 revenue outlook of $885 million to $890 million and expects to finish toward the higher end of the previously provided $880 million-to-$890 million range. The outlook represents mid- to high-single-digit revenue growth.

For VISION 2027, the company continues to target revenue of approximately $950 million or more, an adjusted EBITDA margin of about 18%, and engineered products representing roughly 25% of revenue. Revenue for the 12 months through the third quarter was $877.7 million, while engineered products accounted for 24% of third-quarter sales.

Ducommun’s longer-term VISION 2032 plan targets $1.6 billion to $1.7 billion in total revenue, including a $250 million-to-$300 million acquisition placeholder. The plan also calls for 7% to 8% organic compound annual growth, a 23% adjusted EBITDA margin, free cash flow conversion of 90% to 100% of adjusted net income, and an engineered-products revenue mix of about 40%.

The company cautioned that its outlook remains subject to production rates, commercial and military aircraft demand, U.S. defense spending, customer and supplier concentration, contract execution, supply-chain and manufacturing risks, indebtedness, regulatory requirements and geopolitical conditions. Ducommun also identified potential exposure from an arbitration proceeding related to a 2020 fire at its Guaymas performance center, among other legal and operational risks.