Wedbush Expects Challenges to Continue for Ducommun

In a research report published today by Wedbush, Ducommun Inc. DCO reported a fairly weak 4Q11, with challenges expected to continue. According to Wedbush, “Revenues came in at $188 million versus our estimate of $195 million, driven primarily weak defense sales. Margins in Ducommun Aerostructures (DAS) at 4.9% were substantially lower than our estimate of 8.5%. Excluding the start-up costs associated with the new aircraft development programs, margins in DAS would have been about 10%. Remember the company had indicated that it expected the mix issues to negatively impact DAS margins at least into 1Q 2012, but we were surprised the magnitude of the negative impact (~5% of EBIT margin).” Wedbush maintains its Outperform rating and $21 PT on Ducommun, which closed yesterday at $14.84.