It's all hands on deck at 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
In Trex's defense, it's growing at a healthier clip than the home improvement super-stores. Home Depot
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.
Do you have any experience with Trex decks? Share your thoughts in the comment box below.
Builders FirstSource, Home Depot, and Lowe's Companies are Motley Fool Inside Value picks. Lumber Liquidators Holdings is a Motley Fool Rule Breakers recommendation. Motley Fool Options has recommended writing covered calls on Lowe's Companies. The Fool owns shares of Lumber Liquidators Holdings. 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.
Longtime Fool contributor Rick Munarriz isn't interested in selling his home, even if he recognizes that the once-red-hot South Florida market is a ghost of its former glory. He does not own shares in any of the stocks mentioned in this story. He is part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool has a disclosure policy.