S&P upgrades Ducommun

S&P said it upgraded the ratings for Ducommun Inc. and its first-lien credit facility to BB- from B.

“Revenues have increased by 15% in the first nine months of 2019 exceeding our previous forecast of 3%-5% for all of 2019. This has been driven by higher content on narrow body aircraft, primarily the Boeing 737 and Airbus A320; in the structures segment (up 27% so far in 2019); and a favorable defense budget supporting growth in the electronics segment (up around 4.5%). Profitability has also been better than expected, with EBITDA margins of 13.6% in the third quarter of 2019, compared with our previous expectations of 10%-13% for 2019. Restructuring efforts such as process improvements and supply chain initiatives, as well as its learning curve on critical components of the A320 underpin the gains. Overall this has resulted in our expectation of debt to EBITDA improving to 2.9x-3.3x in 2019, compared with our previous expectation of 3.5x-3.9x, and 4.3x in 2018. Similarly, we now expect funds from operations (FFO) to debt to be 22%-26% in 2019, compared with our previous forecast of 17%-21%, and 18.2% in 2018,” said S&P in a press release.

The outlook is stable.

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