What happened

Shares of Trex (NYSE:TREX) have fallen today, down by 6% as of 12:35 p.m. EDT, after the company reported second-quarter earnings. It also announced a 2-for-1 stock split.

So what

Revenue in the second quarter was $221 million, ahead of the $201 million in sales that analysts were expecting. That translated into net income of $47 million, or $0.81 per share, also topping the consensus estimate of $0.65 per share in profit.

Large outdoor home deck with landscaped trees in the background

Image source: Getty Images.

The company, which makes industrial decking products, added $100 million in borrowing capacity to its revolver in May to reduce risk around COVID-19 and increase financial flexibility. Trex had no outstanding borrowings from the credit facility at the end of the quarter.

Now what

Trex had previously withdrawn its full-year guidance due to uncertainty related to the pandemic but is now comfortable issuing a new outlook for 2020. The company expects 2020 gross margin to be 45% to 50%, including expenses related to COVID-19, and full-year selling, general, and administrative (SG&A) expenses are expected to improve by 80 to 100 basis points. Capital spending for 2020 should be $150 million to $170 million.

For the third quarter, revenue is forecast to be $215 million to $225 million, ahead of the $195.2 million in sales that analysts are expecting. The 2-for-1 stock split will take effect on Sept. 14.

"First half results give us confidence that 2020 will be another year of strong growth for Trex," CEO Bryan Fairbanks said. "Additionally, market leadership, brand recognition and strong channel partnerships have enabled Trex to gain share from the large wood market as consumers increasingly recognize the benefits of Trex composite products."

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