Latest news with #TREX
Yahoo
5 days ago
- Business
- Yahoo
TREX Q1 Earnings Call: New Product Mix and Distribution Strategy Drive Outlook Amid Margin Pressures
Composite decking and railing products manufacturer Trex Company (NYSE:TREX) reported revenue ahead of Wall Street's expectations in Q1 CY2025, but sales fell by 9% year on year to $340 million. Its non-GAAP profit of $0.60 per share was in line with analysts' consensus estimates. Is now the time to buy TREX? Find out in our full research report (it's free). Revenue: $340 million vs analyst estimates of $328.4 million (9% year-on-year decline, 3.5% beat) Adjusted EPS: $0.60 vs analyst estimates of $0.59 (in line) Adjusted EBITDA: $95.91 million vs analyst estimates of $99.59 million (28.2% margin, 3.7% miss) Operating Margin: 24%, down from 31.9% in the same quarter last year Organic Revenue fell 9% year on year (56.5% in the same quarter last year) Market Capitalization: $6.12 billion Management pointed to robust demand for Trex's premium composite decking and railing products as a key factor behind higher-than-expected sales in the latest quarter, despite a year-over-year revenue decline. CEO Bryan Fairbanks highlighted that new product launches contributed 22% of trailing 12-month sales, more than twice last year's level, underscoring the company's emphasis on portfolio innovation. Channel inventory practices also played a role, with the company implementing a new inventory strategy to reduce volatility and better align production with market demand. Management also cited distribution enhancements and dealer conversions as supporting factors during the quarter. Looking ahead, management expects mid to high-single-digit sales growth for the year, supported by continued momentum in premium and entry-level product lines and further expansion in the railing segment. Fairbanks expressed confidence that Trex will outperform the broader repair and remodel market, referencing pent-up demand and market share gains as drivers. CFO Brenda Lovcik added that margin improvements are anticipated in the second half, as costs associated with product changeovers and new manufacturing initiatives subside. Management remains watchful of potential headwinds, such as tariffs on aluminum and steel, but has initiated mitigation strategies including supplier diversification and inventory planning. Management attributed quarterly results to strong uptake of recently launched products, expanded dealer relationships, and ongoing investments in manufacturing and digital transformation. New product launches: Products introduced in the past three years now account for 22% of sales, with management highlighting consumer and contractor enthusiasm for features like the SunComfortable technology, originally developed for the Transcend Lineage line and now expanded to other offerings. Dealer conversions and channel strategy: Trex accelerated dealer conversions and TrexPro contractor recruitment, aided by last year's distribution enhancements, leading to improved brand alignment and market reach. Inventory strategy shift: The company's new approach to inventory management aims to reduce quarterly volatility and ensure partners are stocked appropriately, allowing more consistent production and improved operating efficiency. Manufacturing investment: The Arkansas campus began producing recycled plastic pellets, reducing reliance on external suppliers and supporting cost efficiency across manufacturing sites. This milestone advances Trex's broader continuous improvement program. Segment performance: While demand for premium products remained strong, the entry-level segment began to recover, supported by refined product specifications and expanded color options in the mid-tier Select line. Railing products also saw double-digit growth, benefiting from expanded distributor partnerships. Trex's management sees product innovation, distribution expansion, and operational improvements as central to its growth and margin outlook for the remainder of the year. Product mix evolution: Continued investment in new products, including expanded color options and proprietary technologies, is expected to drive share gains in both the premium and entry-level segments. Management believes this will help Trex outpace the broader repair and remodel market. Operational efficiency gains: The ongoing ramp-up of the Arkansas manufacturing campus and continuous improvement initiatives are projected to enhance margins, particularly as costs tied to product transitions diminish in the second half of the year. Tariff and supply chain mitigation: While less than 5% of cost of sales is directly exposed to tariffs, Trex is taking proactive steps such as supplier diversification, inventory pre-builds, and negotiations with vendors to offset potential cost pressures. Management is monitoring the regulatory environment for further impacts. In upcoming quarters, the StockStory team will watch (1) whether new product introductions continue to gain traction among both contractors and consumers, (2) the pace and impact of expanded distributor relationships on geographic and segment growth, and (3) margin progression as the Arkansas facility ramps up and one-time costs decline. Execution on inventory management and tariff mitigation will also remain important indicators of operational effectiveness. Trex currently trades at a forward P/E ratio of 25.8×. At this valuation, is it a buy or sell post earnings? See for yourself in our full research report (it's free). Donald Trump's victory in the 2024 U.S. Presidential Election sent major indices to all-time highs, but stocks have retraced as investors debate the health of the economy and the potential impact of tariffs. While this leaves much uncertainty around 2025, a few companies are poised for long-term gains regardless of the political or macroeconomic climate, like our Top 9 Market-Beating Stocks. This is a curated list of our High Quality stocks that have generated a market-beating return of 183% over the last five years (as of March 31st 2025). Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like the once-small-cap company Comfort Systems (+782% five-year return). Find your next big winner with StockStory today. Error while retrieving data Sign in to access your portfolio Error while retrieving data Error while retrieving data Error while retrieving data Error while retrieving data
Yahoo
30-05-2025
- Business
- Yahoo
2 Profitable Stocks Worth Investigating and 1 to Think Twice About
A company with profits isn't always a great investment. Some struggle to maintain growth, face looming threats, or fail to reinvest wisely, limiting their future potential. A business making money today isn't necessarily a winner, which is why we analyze companies across multiple dimensions at StockStory. That said, here are two profitable companies that leverage their financial strength to beat the competition and one best left off your watchlist. Trailing 12-Month GAAP Operating Margin: 24% Addressing the demand for aesthetically-pleasing and unique outdoor living spaces, Trex Company (NYSE:TREX) makes wood-alternative decking, railing, and patio furniture. Why Do We Think Twice About TREX? 5.4% annual revenue growth over the last two years was slower than its industrials peers Capital intensity has ramped up over the last five years as its free cash flow margin decreased by 3.9 percentage points Diminishing returns on capital suggest its earlier profit pools are drying up Trex's stock price of $56.42 implies a valuation ratio of 25.5x forward P/E. If you're considering TREX for your portfolio, see our FREE research report to learn more. Trailing 12-Month GAAP Operating Margin: 18.1% With low-pressure heating systems as the first product, Trane (NYSE:TT) designs, manufactures, and sells HVAC and refrigeration systems, the former to commercial and residential building customers and the latter to commercial truck manufacturers. Why Is TT a Good Business? Annual revenue growth of 11.6% over the past two years was outstanding, reflecting market share gains this cycle Share buybacks catapulted its annual earnings per share growth to 23.7%, which outperformed its revenue gains over the last two years Stellar returns on capital showcase management's ability to surface highly profitable business ventures, and its rising returns show it's making even more lucrative bets Trane Technologies is trading at $430.30 per share, or 33.1x forward P/E. Is now the right time to buy? Find out in our full research report, it's free. Trailing 12-Month GAAP Operating Margin: 28.2% Pioneering minimally invasive surgery since its first da Vinci system was FDA-cleared in 2000, Intuitive Surgical (NASDAQ:ISRG) develops and manufactures robotic-assisted surgical systems that enable minimally invasive procedures across various medical specialties. Why Should ISRG Be on Your Watchlist? System Placement averaged 11.8% growth over the past two years and imply healthy demand for its products Sales outlook for the upcoming 12 months implies the business will stay on its desirable two-year growth trajectory Earnings growth has easily exceeded the peer group average over the last five years as its EPS has compounded at 12.3% annually At $555.52 per share, Intuitive Surgical trades at 66.3x forward P/E. Is now the time to initiate a position? See for yourself in our comprehensive research report, it's free. Donald Trump's victory in the 2024 U.S. Presidential Election sent major indices to all-time highs, but stocks have retraced as investors debate the health of the economy and the potential impact of tariffs. While this leaves much uncertainty around 2025, a few companies are poised for long-term gains regardless of the political or macroeconomic climate, like our Top 9 Market-Beating Stocks. This is a curated list of our High Quality stocks that have generated a market-beating return of 183% over the last five years (as of March 31st 2025). Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like the once-micro-cap company Kadant (+351% five-year return). Find your next big winner with StockStory today for free. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Yahoo
09-05-2025
- Business
- Yahoo
Trex Co Inc (TREX) Q1 2025 Earnings Call Highlights: Navigating Challenges with Strategic ...
Net Sales: $340 million, a decrease of 9% compared to $374 million in Q1 2024. Gross Profit: $138 million with a gross margin of 40.5%, down from $170 million and 45.4% margin in Q1 2024. Net Income: $60 million or $0.56 per diluted share, a decrease of 32% from $89 million or $0.82 per diluted share in Q1 2024. Adjusted Net Income: $64 million or $0.60 per diluted share. Adjusted EBITDA: $101 million, down 24% from $133 million in Q1 2024. SG&A Expenses: $56 million or 16.5% of net sales, compared to $51 million or 13.5% of net sales in Q1 2024. Adjusted SG&A Expenses: $55 million or 16% of net sales. Full-Year 2025 Guidance: Net sales growth of 5% to 7%, adjusted EBITDA margin to exceed 31%, SG&A expenses approximately 16% of net sales. Q2 2025 Sales Guidance: Expected to be in the range of $370 million to $380 million. Capital Expenditures: Projected to be approximately $200 million for the full year 2025. Warning! GuruFocus has detected 4 Warning Signs with TREX. Release Date: May 08, 2025 For the complete transcript of the earnings call, please refer to the full earnings call transcript. Trex Co Inc (NYSE:TREX) reported higher-than-expected sales in the first quarter, driven by strong demand for premium products and effective positioning in home centers and the pro channel. New products launched within the last 36 months accounted for approximately 22% of trailing 12-month sales, showcasing Trex's innovation and market share gains. The company successfully converted more dealers to the Trex brand, with TrexPro recruitment and qualification significantly ahead of the previous year. Trex launched a new marketing campaign highlighting the performance advantages of its products, including marine-grade decking and SunComfortable technology. The new manufacturing campus in Arkansas began producing recycled plastic pellets, contributing to cost savings and enhancing operational efficiency. Net sales decreased by 9% compared to the previous year, primarily due to the absence of a $40 million channel inventory build that occurred last year. Gross margin decreased by 490 basis points, impacted by railing conversion costs, lower production levels, and changes to the production process for entry-level decking. Net income decreased by 32% year-over-year, reflecting higher expenses related to strategic initiatives and startup costs. The company faces potential impacts from tariffs, with less than 5% of cost of sales projected to be affected, primarily related to aluminum and steel purchases. Trex incurred several expenses tied to strategic initiatives, including startup costs for the Arkansas operation and investments in digital transformation, impacting short-term profitability. Q: Can you explain the changes made to the enhanced decking and the expected impact on sales? A: Bryan Fairbanks, President and CEO, explained that customer feedback led to manufacturing changes in the enhanced decking to improve strength and aesthetics. These changes are expected to result in stronger sales, although there were some changeover costs in the first quarter. Q: Are the factors impacting Q1 margins expected to continue into Q2? A: Brenda Lovcik, CFO, stated that the factors affecting Q1 margins, such as railing conversion costs and production changes, are temporary and will reverse in the second half of the year. Q: How do you expect seasonality to affect sales in the second half of the year? A: Bryan Fairbanks noted that the company expects a typical seasonal pattern, with strong sales in Q2, a slight decline in Q3, and a significant drop in Q4 as the channel prepares for the next year. Q: How are the new distributor relationships impacting sales and market presence? A: Bryan Fairbanks highlighted that the focus of distributors on Trex products has led to significant dealer conversions and improved market presence, particularly with the new railing products. Q: What are the priorities for capital allocation moving forward? A: Bryan Fairbanks stated that the priorities remain acquisitions, organic growth, and share buybacks. The company expects increased free cash flow as capital expenditures decline after the Arkansas facility development. Q: How is the entry-level product segment performing, and what are the expectations? A: Bryan Fairbanks noted that the entry-level segment is stabilizing, with sequential improvements seen over the past two quarters, driven by pent-up demand in the repair and remodel market. Q: Can you provide more details on the impact of tariffs and mitigation strategies? A: Bryan Fairbanks mentioned that less than 5% of cost of sales is impacted by tariffs, with mitigation efforts including supplier negotiations and sourcing adjustments. The company is committed to minimizing the impact. Q: What are the expected benefits of the digital transformation initiatives? A: Brenda Lovcik outlined that the digital transformation aims to optimize business processes, enhance data utilization for decision-making, and improve customer experience, ultimately driving operational efficiency. For the complete transcript of the earnings call, please refer to the full earnings call transcript. This article first appeared on GuruFocus. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Yahoo
08-05-2025
- Business
- Yahoo
Trex's (NYSE:TREX) Q1 Sales Top Estimates
Composite decking and railing products manufacturer Trex Company (NYSE:TREX) reported Q1 CY2025 results topping the market's revenue expectations , but sales fell by 9% year on year to $340 million. Its GAAP profit of $0.56 per share was 4.1% below analysts' consensus estimates. Is now the time to buy Trex? Find out in our full research report. Revenue: $340 million vs analyst estimates of $328.4 million (9% year-on-year decline, 3.5% beat) EPS (GAAP): $0.56 vs analyst expectations of $0.58 (4.1% miss) Adjusted EBITDA: $95.91 million vs analyst estimates of $99.59 million (28.2% margin, 3.7% miss) Operating Margin: 24%, down from 31.9% in the same quarter last year Free Cash Flow was -$79.49 million compared to -$211.8 million in the same quarter last year Market Capitalization: $6.06 billion 'First quarter sales exceeded our expectations driven by the continued strength of our premium products and our prominent position in both retail and the pro-channel,' said Bryan Fairbanks, President and CEO. Addressing the demand for aesthetically-pleasing and unique outdoor living spaces, Trex Company (NYSE:TREX) makes wood-alternative decking, railing, and patio furniture. Reviewing a company's long-term sales performance reveals insights into its quality. Any business can put up a good quarter or two, but many enduring ones grow for years. Thankfully, Trex's 7.8% annualized revenue growth over the last five years was decent. Its growth was slightly above the average industrials company and shows its offerings resonate with customers. Long-term growth is the most important, but within industrials, a half-decade historical view may miss new industry trends or demand cycles. Trex's recent performance shows its demand has slowed as its annualized revenue growth of 5.4% over the last two years was below its five-year trend. This quarter, Trex's revenue fell by 9% year on year to $340 million but beat Wall Street's estimates by 3.5%. Looking ahead, sell-side analysts expect revenue to grow 10.8% over the next 12 months, an improvement versus the last two years. This projection is healthy and indicates its newer products and services will spur better top-line performance. Unless you've been living under a rock, it should be obvious by now that generative AI is going to have a huge impact on how large corporations do business. While Nvidia and AMD are trading close to all-time highs, we prefer a lesser-known (but still profitable) stock benefiting from the rise of AI. Click here to access our free report one of our favorites growth stories. Trex has been a well-oiled machine over the last five years. It demonstrated elite profitability for an industrials business, boasting an average operating margin of 24.5%. This result isn't surprising as its high gross margin gives it a favorable starting point. Analyzing the trend in its profitability, Trex's operating margin decreased by 2.2 percentage points over the last five years. This raises questions about the company's expense base because its revenue growth should have given it leverage on its fixed costs, resulting in better economies of scale and profitability. In Q1, Trex generated an operating profit margin of 24%, down 7.8 percentage points year on year. Since Trex's operating margin decreased more than its gross margin, we can assume it was less efficient because expenses such as marketing, R&D, and administrative overhead increased. We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company's growth is profitable. Trex's EPS grew at an unimpressive 6.5% compounded annual growth rate over the last five years, lower than its 7.8% annualized revenue growth. This tells us the company became less profitable on a per-share basis as it expanded due to non-fundamental factors such as interest expenses and taxes. Diving into the nuances of Trex's earnings can give us a better understanding of its performance. As we mentioned earlier, Trex's operating margin declined by 2.2 percentage points over the last five years. This was the most relevant factor (aside from the revenue impact) behind its lower earnings; taxes and interest expenses can also affect EPS but don't tell us as much about a company's fundamentals. Like with revenue, we analyze EPS over a shorter period to see if we are missing a change in the business. For Trex, its two-year annual EPS growth of 14.8% was higher than its five-year trend. This acceleration made it one of the faster-growing industrials companies in recent history. In Q1, Trex reported EPS at $0.56, down from $0.82 in the same quarter last year. This print missed analysts' estimates. Over the next 12 months, Wall Street expects Trex's full-year EPS of $1.82 to grow 23.8%. We were impressed by how significantly Trex blew past analysts' revenue expectations this quarter. On the other hand, its EPS missed and its EBITDA fell short of Wall Street's estimates. Overall, this was a softer quarter. The stock traded down 1.4% to $57.50 immediately after reporting. Trex didn't show it's best hand this quarter, but does that create an opportunity to buy the stock right now? We think that the latest quarter is just one piece of the longer-term business quality puzzle. Quality, when combined with valuation, can help determine if the stock is a buy. We cover that in our actionable full research report which you can read here, it's free.
Yahoo
15-04-2025
- Business
- Yahoo
3 Reasons to Sell TREX and 1 Stock to Buy Instead
Although the S&P 500 is down 6.9% over the past six months, Trex's stock price has fallen further to $54.94, losing shareholders 15.8% of their capital. This might have investors contemplating their next move. Is now the time to buy Trex, or should you be careful about including it in your portfolio? Dive into our full research report to see our analyst team's opinion, it's free. Even with the cheaper entry price, we're swiping left on Trex for now. Here are three reasons why you should be careful with TREX and a stock we'd rather own. Addressing the demand for aesthetically-pleasing and unique outdoor living spaces, Trex Company (NYSE:TREX) makes wood-alternative decking, railing, and patio furniture. We at StockStory place the most emphasis on long-term growth, but within industrials, a stretched historical view may miss cycles, industry trends, or a company capitalizing on catalysts such as a new contract win or a successful product line. Trex's recent performance shows its demand has slowed as its annualized revenue growth of 2% over the last two years was below its five-year trend. If you've followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can't use accounting profits to pay the bills. As you can see below, Trex's margin dropped by 9.3 percentage points over the last five years. This along with its unexciting margin put the company in a tough spot, and shareholders are likely hoping it can reverse course. If the trend continues, it could signal it's becoming a more capital-intensive business. Trex's free cash flow margin for the trailing 12 months was negative 7.7%. A company's ROIC, or return on invested capital, shows how much operating profit it makes compared to the money it has raised (debt and equity). We like to invest in businesses with high returns, but the trend in a company's ROIC is what often surprises the market and moves the stock price. Unfortunately, Trex's ROIC has decreased over the last few years. We like what management has done in the past, but its declining returns are perhaps a symptom of fewer profitable growth opportunities. Trex isn't a terrible business, but it doesn't pass our bar. After the recent drawdown, the stock trades at 25.2× forward price-to-earnings (or $54.94 per share). This valuation tells us it's a bit of a market darling with a lot of good news priced in - we think there are better stocks to buy right now. We'd suggest looking at one of our top software and edge computing picks. The market surged in 2024 and reached record highs after Donald Trump's presidential victory in November, but questions about new economic policies are adding much uncertainty for 2025. While the crowd speculates what might happen next, we're homing in on the companies that can succeed regardless of the political or macroeconomic environment. Put yourself in the driver's seat and build a durable portfolio by checking out our Top 6 Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 175% over the last five years. Stocks that made our list in 2019 include now familiar names such as Nvidia (+2,183% between December 2019 and December 2024) as well as under-the-radar businesses like Comfort Systems (+751% five-year return). Find your next big winner with StockStory today for free.
