Defense Business Growth and Missile Franchise Expansion
Ducommun's defense segment grew 16% in Q2, driven by missile and radar systems, with missile business up 39%.
The missile backlog increased 30% year-over-year, supporting future growth prospects.
The company supports over a dozen missile programs, including AMRAAM, MIR, PAC-3, and Tomahawk, positioning it well for inventory replenishment.
Key missile programs like Apache blades, Tomahawk cables, and TOW missile cases are scheduled for back-to-start in H2 2025 and into 2026, pending approvals.
Ducommun is actively negotiating record levels of SM3 missile orders, aligning with U.S. defense priorities and inventory replenishment needs.
The radar franchise, including SPY-6, LTAMDS, TPY-2, and G/ATOR, is positioned for growth, supporting U.S. and NATO defense priorities.
Adjusted EBITDA hit a record $32.4 million, representing 16% of revenue, an 80 basis point expansion from the prior year, continuing momentum toward the VISION 2027 goal of 18%.
Consolidated backlog stood at $1.02 billion, down $50 million year-over-year due to timing of awards; defense backlog was flat at $593 million, commercial aerospace backlog declined by $47 million.
Ducommun reported Q2 2025 revenue of $202.3 million, a 2.7% increase year-over-year, marking the 17th consecutive quarter of revenue growth and setting a new quarterly record.
GAAP diluted EPS was $0.82 compared to $0.52 in Q2 2024; adjusted diluted EPS was $0.88 versus $0.83 prior year, driven by higher operating income and lower interest expense.
Gross margin reached a record 26.6%, up 60 basis points year-over-year, supported by engineered product portfolio growth, pricing initiatives, and productivity improvements.
Military and space segment revenue grew 16% driven by missile and radar programs, while commercial aerospace revenue declined 10% due to lower Boeing build rates and destocking.
APM sales increased sequentially by 14%, with a 20% increase in advanced materials sales and adjusted EBITDA margin rising from 11% to 14%.
Chemours delivered strong Q2 2025 results, surpassing expectations with improved performance across all three business segments: TSS, TT, and APM.
Operational issues in TT and APM caused some disruptions but were addressed with corrective actions.
The company reached a $250 million net present value settlement with New Jersey for environmental claims, funded largely by insurance proceeds and restricted cash.
TSS net sales of Opteon Refrigerants grew 65% year-over-year, with a 35% adjusted EBITDA margin, driven by the 2025 U.S. AIM Act transition mandate and seasonal demand.
TT segment net sales increased 10% sequentially with a 9% volume increase but flat pricing, despite operational disruptions.
Global Defense Spending and Industry Inflection Point
Eric DeMarco highlighted that 2024 global defense and national security expenditure was approximately $2.5 trillion, with US spending expected to exceed $1 trillion in 2025.
He emphasized a worldwide recapitalization of weapon systems and infrastructure, positioning Kratos to capitalize on this industry inflection point.
Recent US executive orders and legislation (FORGED Act, SPEED Act) aim to streamline defense procurement, benefiting companies like Kratos.
Kratos is experiencing organic revenue growth of 15% in Q2, a record bid pipeline of $13 billion, and a forecasted 13-15% organic growth through 2026.
Record Defense Orders and International Market Expansion
Raytheon booked over $5 billion in integrated air and missile defense awards, including the largest order in program history of $1.1 billion.
International demand is strong, with NATO allies increasing defense spending to 3.5% of GDP over the next decade, and Raytheon expanding regional partnerships such as the agreement with Spain for Patriot production.
Demand for core defense products is driven by increased global focus on air dominance, with significant growth in programs like Gem-T, Coyote, and AMRAAM, supported by $150 billion in U.S. defense budget legislation.
Dafinchi