Have Trex, Lumber Liquidators, and Tile Shop Hit the Floor?

Home improvement specialists stumbled this earnings season.

May 12, 2014 at 2:48PM

Shares of Trex (NYSE:TREX) walked the plank last week, losing 15% of their value after posting disappointing quarterly results. The leader in wood-alternative decking isn't the first flooring specialist to move lower after posting fresh financials this earnings season. A week ago we saw Lumber Liquidators (NYSE:LL) and Tile Shop Holdings (NASDAQ:TTS) initially slump after announcing quarterly results.

Trex's report was certainly a stinker. Profitability plunged 43% to $0.73 a share, with revenue slipping 7% for the period. That's not going to cut it when analysts were targeting a profit of $0.93 a share on rising sales. To be fair, a lot of companies have been using crummy weather as a scapegoat for soft quarters, but Trex is actually entitled to play that particular sympathy card: No one was going to kick off a deck project with a backyard full of snow through chunks of January and, to a lesser extent, February.

Investors panicked, but the market's negative reaction is overdone. What Trex missed out on during the snowy first quarter it will largely make up during the current quarter. Trex is calling for $125 million in revenue during the current quarter, resulting in 27% year-over-year growth and a 9% year-over-year uptick during the first six months of the year. 

Hardwood flooring retailer Lumber Liquidators and tile specialist Tile Shop had somewhat similar shortfalls, though both stocks rebounded quickly after initially diving on their uninspiring results.

Tile Shop's sales grew 13%, but that was expansion's handiwork as same-store sales fell 2.3% for the period. Tile Shop's sales of $64.4 million and earnings of $0.09 a share fell short of expectations. However, like Trex, Tile Shop sees better times ahead. It sees comps clocking in at a gain of 4% to 6% for all of 2014. 

Lumber Liquidators aped Tile Shop's softer than expected growth in net sales propelled entirely by expansion. Comps slipped 0.6% during the quarter. However, Lumber Liquidators isn't budging from its full-year outlook, targeting profitability per share of $3.25 to $3.60 on net sales of $1.15 billion to $1.2 billion. 

In the end, all three companies are saying the same thing. They want investors to ignore the disappointing quarter that was held back by snowstorms early on and the shift of the Easter holiday from March of last year to April this time around. It's a fair request. Even Lumber Liquidators -- a retailer that relies primarily on indoor flooring -- reported a dramatic split in the comps of weather-affected stores relative to stores that didn't get snowed in this year. With all three companies on track to make back later this year what they missed out on earlier, Trex, Lumber Liquidators, and Tile Shop Holdings can be reasonably bought on dips here. They improve floors, but now it's time for opportunistic investors to set their sights higher.

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Rick Munarriz has no position in any stocks mentioned. The Motley Fool recommends and owns shares of Lumber Liquidators, Tile Shop Holdings, and Trex. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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