Ducommun Incorporated: Uncommun results

Lately the broader markets have been a bit grounded. The Dow finished down for the month of December for only the third time in eleven years. The 3.5% return that the S&P 500 posted in 2007 left much still to be desired. Not to mention the fact that the Russell 2000 fell to 15-month lows earlier this week. However, one segment of the market that’s been taking off has been the aerospace and defense sector. The Dow Jones U.S. Select Aerospace & Defense Index posted a mighty return of 28.2% in 2007. 

One small cap that’s been leading the boom is Ducommun Incorporated (NYSE: DCO). And the results that this Carson, Calif.-based company have posted have been anything but common. At a market cap of just $331 million, the company struck it rich in 2007. Ducommun’s stock soared nearly 67% last year.

Founded in 1849 at the height of the Gold Rush, Ducommun is the oldest continuously operating business in Los Angeles. Back then the company repaired watches for prospectors. Today it engineers and manufactures components and assemblies for commercial aircraft, military aircraft and space programs.

A prominent example of Ducommun’s work is its support for a subsidiary of United Technologies Corporation (NYSE: UTX), which manufactures the Black Hawk helicopter for the military. In November, Ducommun locked up a five-year, $60 million deal to provide titanium erosion shields for the helicopter program. The shields are designed to protect the Black Hawk’s main rotor blades. Some of the company’s other major customers include the U.S. government, The Boeing Company (NYSE: BA), Lockheed Martin Corporation (NYSE: LMT), and Raytheon Company (NYSE: RTN).

The Black Hawk contract win is reminiscent of the wave of success that Ducommun has had recently. For the third-quarter ended Sept. 29, management reported net income of $5.8 million, or $0.55 per diluted share on $94.7 million in sales. These figures handily topped analysts polled by Thomson Financial, who were expecting EPS of $0.45 per share on $90.6 million in sales. The results also represented a 42.3% increase in net income and a 16.1% increase in sales versus the year-ago quarter.

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