Aerospace parts manufacturer Ducommun
One of the risks involved in investing in Ducommun is its highly concentrated customer base. Boeing
In particular, Ducommun manufactures components and assemblies for Boeing's commercial aircraft, its C-17 troop transport airplane, and the Apache helicopter. Such dependence means that the loss of any of those contracts could have significant impact. Investors should take note, then, of Ducommun's warnings that Boeing awarded a spoiler assembly contract, worth about $5.8 million, or 9% of sales, to a competitor. Although the competitor isn't named in the warning, Goodrich
Fortunately, sales have been rising primarily due to increased military spending -- in particular, the Boeing Apache helicopter program that supplies rotor blades. Sales from the Apache contract account for around 19% of sales.
It doesn't look like Ducommun will be making great strides in its space sector, although through no fault of its own. It makes components for the expendable fuel tanks for NASA's troubled Space Shuttle program, accounting for about 4% of sales. But with NASA's spotty record of late, it doesn't appear Ducommun can expect any notable revenue growth here -- at least not any time soon.
It's been nearly a year and a half since Tom Gardner offered up Ducommun as a special recommendation to members of Motley Fool Hidden Gems, along with Encore Wire
After releasing its quarterly results, the stock now stands at virtually the same price at which it was recommended. Usana has fared remarkably better, up by about 77%, while Encore is down about 25% over that same time.
With profits down 5% as sales rose 8%, Ducommun might still have some more turbulence ahead. Investors might want to trim their holdings before getting caught in any wind shear.
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