Trex Buys to Grow

It's all hands on deck at Trex (Nasdaq: TREX  ) .

The maker of alternative decking put out a mixed quarterly report this morning, announcing a timely acquisition to help pick up the pace of its sluggish organic growth.

Revenue inched just 4% higher, to $69 million, well short of the $70.6 million the pros were targeting.

The good news is that Trex's adjusted profit of $0.15 a share was a welcome reversal of the deficit it posted during the same period a year earlier. Analysts were banking on net income of only $0.08 a share.

It's easy to cheer the robust margins, but weak top-line growth isn't what you like to see as we head into the telltale spring season when everyone's springing for backyard upgrades. Trex is forecasting $115 million in revenue for the seasonally potent current quarter, but Wall Street was expecting more than $120 million.

Interior hardwood flooring specialist Lumber Liquidators (NYSE: LL  ) grew at a faster rate during the same period. Builders FirstSource (Nasdaq: BLDR  ) , while a better proxy for new residential construction than home improvements, didn't keep up the pace, but encouragingly grew its sales.

In Trex's defense, it's growing at a healthier clip than the home improvement super-stores. Home Depot (NYSE: HD  ) and Lowe's (NYSE: LOW  ) operate on fiscal years that end a month later, but analysts feel that neither company will grow revenue by more than 2% in the quarterly period that just ended.

Trex is capable of doing better, specializing in a niche that should be an early leader out of an economic slump. Are homeowners reluctant to improve their properties given the volume of mortgages that are underwater? Are other big-ticket purchases such as new cars eating into the family budget?

Trex isn't taking the situation lightly. It's buying most of the assets of Iron Deck, a maker of steel deck framing systems that outlast pressure-treated lumber for support. It's a move that helps it buy into related decking growth in the near term, as it waits out a more potent recovery in the backyard patio.

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