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Trex Company (TREX)
NYSE:TREX
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Trex Company
(NYSE:TREX)
71Outperform
Positive Factors
Earnings
TREX reported strong 4Q24 results with revenue, EBITDA, and EPS all coming in well above Street estimates.
Market Position
Trex is the number one brand in the composite decking space, which has an ongoing material conversion story that should lead to faster than market growth in the years ahead.
Product Innovation
New products launched in the last 36 months accounted for 22% of TTM sales, showing significant growth from 10% last year.
Negative Factors
Guidance
Guidance outlined a meaningful 1Q25 revenue decline with 2Q25 roughly flat due in large part to smaller channel inventory builds.
Production Costs
TREX faced roughly $12mm of temporary GM headwinds in 1Q25 due to railing conversion costs, lower production volumes, and entry-level product line improvements.
Trex Company (TREX) vs. S&P 500 (SPY)
Market Cap
$6.23B
Dividend YieldN/A
Average Volume (3M)1.71M
Price to Earnings (P/E)27.9
Beta (1Y)1.36
Revenue Growth-9.10%
EPS Growth-21.50%
CountryUS
Employees1,838
SectorIndustrials
Sector Strength82
IndustryConstruction
Share Statistics
EPS (TTM)0.60
Shares Outstanding107,219,920
10 Day Avg. Volume1,140,305
30 Day Avg. Volume1,707,732
Financial Highlights & Ratios
PEG RatioN/A
Price to Book (P/B)N/A
Price to Sales (P/S)0.00
Price to Cash Flow (P/CF)0.00
P/FCF Ratio0.00
Enterprise Value/Market Cap1.23
Enterprise Value/RevenueN/A
Enterprise Value/Gross Profit15.78
Enterprise Value/EbitdaN/A
Forecast
1Y Price Target
$68.85Price Target Upside19.20% Upside
Rating ConsensusModerate Buy
Number of Analyst Covering14
Trex Company Business Overview & Revenue Model
Company DescriptionTrex Company, Inc. manufactures and distributes decking, railing, and outdoor living products and accessories for residential and commercial markets in the United States. The company operates in two segments, Trex Residential and Trex Commercial. It offers decking products under the names Trex Transcend, Trex Select, and Trex Enhance for protection against fading, staining, mold, and scratching; Trex Hideaway, a hidden fastening system; and Trex DeckLighting, a LED dimmable deck lighting for use on posts, floors, and steps. The company also provides Trex Transcend Railing products that are used in Trex decking products and other decking materials; Trex Select Railing products for a simple clean finished look; Trex Enhance Railing system; and Trex Signature aluminum railing for a contemporary look. In addition, it offers Trex Seclusions, a fencing product that includes structural posts, bottom and top rails, pickets, and decorative post caps. In addition, it designs, engineers, and markets architectural and aluminum railing systems, and staging equipment and accessories for the commercial market, as well as sports stadiums and performing arts venues. Further, the company acts as a licensor in various licensing agreements with third parties to manufacture and sell products under the Trex name, including Trex Outdoor Furniture; Trex RainEscape, an above joist deck drainage system; Trex Pergola, a cellular PVC product; Trex Latticeworks outdoor lattice boards; Trex Cornhole boards; Diablo Trex Blade, a saw blade for wood-alternative composite decking; Trex SpiralStairs and structural steel posts; and Trex Outdoor Kitchens, Cabinetry, and Storage products. It sells its products through wholesale distributors, retail lumber dealers, and Home Depot and Lowe's stores, as well as through its direct sales staff, independent sales representatives, and bidding on projects. Trex Company, Inc. was founded in 1996 and is headquartered in Winchester, Virginia.
How the Company Makes MoneyTrex Company generates revenue primarily through the manufacturing and sale of its composite decking and railing products. The company's revenue streams include direct sales to retailers and distributors, who then sell these products to end consumers, as well as direct sales to professional contractors and builders. Significant partnerships with home improvement retailers like Home Depot and Lowe's also contribute to its earnings by expanding its market reach. Additionally, Trex benefits from its focus on sustainability, as its products are made from recycled materials, which appeals to environmentally conscious consumers and helps differentiate it in the competitive market. The company's revenue is further supported by its innovation in product design and development, which maintains its position as a leader in the composite decking industry.
Trex Company Financial Statement Overview
Summary
Trex Company demonstrates strong financial health with consistent revenue growth, enhanced profitability, and efficient cash flow management. Despite minor fluctuations in revenue and free cash flow, the company maintains a balanced approach to debt and equity financing.Income Statement
Trex Company has shown a consistent revenue growth trajectory from 2019 to 2024, with a notable increase in gross profit margins and EBIT margins over recent years. The net profit margin has also shown positive trends, reflecting strong profitability. However, there was a slight revenue decline in 2022, indicating potential market volatility or operational challenges.―
Balance Sheet
The company's balance sheet exhibits a healthy equity position with a stable debt-to-equity ratio, suggesting prudent financial leverage. The return on equity has been strong, indicating efficient use of equity to generate profits. However, the equity ratio showed some fluctuation, reflecting changes in asset financing strategies.78
Cash Flow
Trex's operating cash flow remains robust, with a high operating cash flow to net income ratio, underscoring efficient cash generation relative to earnings. Although free cash flow growth has been inconsistent, recent trends indicate improvement. The free cash flow to net income ratio highlights the company's ability to translate earnings into cash flow effectively.―
| Breakdown | ||||
| Dec 2024 | Dec 2023 | Dec 2022 | Dec 2021 | Dec 2020 |
|---|---|---|---|---|
| Income Statement | Total Revenue | |||
| 1.15B | 1.09B | 1.11B | 1.20B | 880.83M | Gross Profit |
| 485.67M | 452.41M | 403.99M | 460.50M | 359.46M | EBIT |
| 305.67M | 276.20M | 246.74M | 275.38M | 233.63M | EBITDA |
| 305.67M | 326.39M | 306.46M | 356.83M | 251.57M | Net Income Common Stockholders |
| 226.39M | 205.38M | 184.63M | 208.74M | 175.63M |
| Balance Sheet | Cash, Cash Equivalents and Short-Term Investments | |||
| 1.29M | 1.96M | 12.32M | 141.05M | 121.70M | Total Assets |
| 1.32B | 932.88M | 933.71M | 920.32M | 770.49M | Total Debt |
| 244.58M | 32.00M | 245.97M | 28.26M | 28.58M | Net Debt |
| 243.29M | 30.04M | 233.65M | -112.79M | -93.12M | Total Liabilities |
| 474.16M | 216.21M | 415.36M | 195.29M | 181.96M | Stockholders Equity |
| 850.14M | 716.67M | 518.35M | 725.03M | 588.53M |
| Cash Flow | Free Cash Flow | |||
| 143.93M | 223.33M | 39.99M | 98.67M | 14.47M | Operating Cash Flow |
| 143.93M | 389.42M | 216.22M | 258.06M | 187.29M | Investing Cash Flow |
| -236.53M | -166.09M | -168.88M | -158.04M | -170.66M | Financing Cash Flow |
| 91.94M | -233.70M | -176.06M | -80.67M | -43.77M |
Trex Company Technical Analysis
Negative
57.76
Price Trends
57.25
Positive
63.47
Negative
66.21
Negative
Market Momentum
0.22
Negative
50.58
Neutral
31.35
Neutral
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For TREX, the sentiment is Negative. The current price of 57.76 is above the 20-day moving average (MA) of 56.90, above the 50-day MA of 57.25, and below the 200-day MA of 66.21, indicating a neutral trend. The MACD of 0.22 indicates Negative momentum. The RSI at 50.58 is Neutral, neither overbought nor oversold. The STOCH value of 31.35 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for TREX.
Trex Company Risk Analysis
Trex Company disclosed 17 risk factors in its most recent earnings report. Trex Company reported the most risks in the “Production” category.
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
Latest Risks Added 0 New Risks
Trex Company Peers Comparison
Overall Rating
UnderperformOutperform
Sector (64)
Financial Indicators
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
78 Outperform | $7.07B | 24.58 | 17.61% | 0.81% | 3.89% | 8.17% | |
77 Outperform | $6.52B | 24.04 | 38.60% | 0.78% | 14.55% | 17.54% | |
74 Outperform | $6.30B | 15.38 | 24.41% | 1.18% | 8.09% | 55.08% | |
71 Outperform | $6.23B | 27.87 | 23.07% | ― | -9.10% | -21.50% | |
66 Neutral | $5.29B | 46.77 | 7.64% | ― | 4.73% | -27.46% | |
64 Neutral | $4.30B | 11.84 | 5.23% | 249.82% | 4.06% | -10.21% | |
44 Neutral | $5.03B | ― | -64.96% | ― | -89.50% | -10.50% |
* Industrials Sector Average
Performance Comparison
TREX
Trex Company
57.76
-29.62
-33.90%
AWI
Armstrong World
152.13
35.52
30.46%
LPX
Louisiana-Pacific
90.61
4.29
4.97%
WTS
Watts Water Technologies
236.50
25.40
12.03%
SITE
SiteOne Landscape Supply
120.66
-35.83
-22.90%
JOBY
Joby Aviation
6.78
1.72
33.99%
Trex Company Earnings Call Summary
Earnings Call Date:May 08, 2025
(Q1-2025)
| % Change Since: -0.93%|
Next Earnings Date:Aug 11, 2025
Earnings Call Sentiment Neutral
The earnings call highlighted a strong start to the year with higher than expected sales and successful product innovations. However, these were tempered by a decline in net sales and gross margin, increased expenses, and uncertainties related to tariffs. Despite these challenges, the company maintains a strong market position and strategic initiatives are expected to drive future growth.Q1-2025 Updates
Positive Updates
Higher Than Expected Sales
Trex Company delivered higher than expected sales in Q1 2025, driven by strong demand for premium products and significant pickup in March demand.
New Product Success
New products launched within the last 36 months accounted for approximately 22% of trailing 12-month sales, more than twice the level from the previous year.
Successful Dealer Conversions
Increased number of dealers converted to the Trex brand, with a pace of TrexPro recruitment and qualification meaningfully ahead of the same period last year.
Strategic Inventory Management
Implementation of a new inventory strategy, designed to reduce volatility and improve overall operating efficiency, is yielding positive results.
Strong Market Position
Trex maintains a strong market position with a significant market share in the decking and railing category, supported by expanded distributor partnerships.
Negative Updates
Decrease in Net Sales
First quarter net sales were $340 million, a decrease of 9% from $374 million in the previous year, primarily due to the absence of a $40 million channel inventory build.
Gross Margin Decline
Gross margin decreased by 490 basis points to 40.5%, impacted by railing conversion costs, lower production, and changes to the enhanced decking production process.
Increased SG&A Expenses
Selling, general, and administrative expenses increased to $56 million or 16.5% of net sales, from $51 million or 13.5% of net sales.
Net Income Decline
Net income decreased by 32% to $60 million or $0.56 per diluted share, from $89 million or $0.82 per diluted share in the previous year.
Tariff Uncertainties
Less than 5% of cost of sales is impacted by tariffs, with ongoing uncertainties around tariff-related costs affecting aluminum and steel purchases.
Company Guidance
During Trex Company, Inc.'s first-quarter 2025 earnings call, key metrics and guidance were outlined. The company achieved net sales of $340 million, a decrease from $374 million the previous year, but better than expected due to strong demand for premium products. The first quarter saw a gross profit of $138 million with a gross margin of 40.5%. New products launched in the past 36 months contributed 22% to the trailing 12-month sales, twice the level of last year's first quarter. Trex expects mid to high-single-digit growth for the year, with a projection of 5% to 7% net sales growth. Adjusted EBITDA margin is anticipated to exceed 31%, with SG&A expenses around 16% of net sales. Capital expenditures are projected at $200 million, with Arkansas campus development continuing. Tariff impacts are expected to affect less than 5% of cost of sales, with mitigation efforts underway. The company remains focused on expanding its product offerings and leveraging strong distributor and dealer partnerships.Glossary
OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.
NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.
UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.