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Trex Builds on the Gains of Lumber Liquidators and Tile Shop

By Rick Munarriz – Feb 24, 2014 at 2:40PM

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Trex posts blowout results, and announces a stock split.

It's bad news if your weather-resistant Trex (TREX -2.29%) decking planks split, but it's another thing entirely when it's the company doing the splitting.

Trex soared to a new high today after posting a blowout financial report and declaring a stock split. The leading maker of wood-alternative decking materials saw its net sales soar 38% to $63.8 million, blowing past the 10% increase that analysts were modeling. Trex's adjusted profit of $0.23 a share reversed a modest loss a year earlier and was well ahead of the $0.06 a share that Wall Street was targeting. 

It wasn't a perfect report. Trex's guidance calling for $115 million in net sales for the new quarter is well short of analyst estimates. Then again, a good chunk of the shortfall is simply sales that came early this season to boost the holiday quarter's performance. 

The market's overlooking the uninspiring outlook, sending the shares as much as 24% higher a few hours into the trading day. Trex is confident enough in its position that it's also declaring a 2-for-1 stock split that will go into effect in May. 

Trex's strong showing follows strong gains out of Lumber Liquidators (LL 0.87%) and Tile Shop Holdings (TTSH -0.46%) last week.

Hardwood discounter Lumber Liquidators saw its sales climb 23% on an impressive 15.6% uptick in comps. Flooring retailer Tile Shop's stock soared 13% on the week after posting a 25% surge in sales, fueled by a 10.1% increase in comps. You probably didn't see too many retailers post double-digit increases at the individual store level the way that these two did during a tricky holiday quarter. Clearly, home improvement is a big beneficiary here, but it's not universal. Home Depot (HD 0.28%) reports tomorrow, and the leading home improvement superstore chain is expected to post flattish results. 

Home Depot may be benefiting from the same trends that are pushing decking projects at Trex, tile upgrades at Tile Shop, and hardwood plank installations at Lumber Liquidators, but it has a lot of other product categories that aren't getting the same kind of favorable tailwinds that the more popular home improvement tasks are receiving. 

As for Trex, it doesn't generate comps the way that Lumber Liquidators, Tile Shop, and Home Depot do, since it doesn't operate stand-alone stores. But for one quarter at least, Trex's sales grew faster than its peers. It may have been a cruel winter, but a lot of people out there are apparently planning on enjoying their backyards a little more this year on their new or restored decks once the cold gives way to barbecue weather.

Rick Munarriz has no position in any stocks mentioned. The Motley Fool recommends Home Depot, Lumber Liquidators, Tile Shop Holdings, and Trex. The Motley Fool owns shares of Lumber Liquidators, Tile Shop Holdings, and Trex. 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.

Stocks Mentioned

Trex Stock Quote
$45.15 (-2.29%) $-1.06
Home Depot Stock Quote
Home Depot
$327.99 (0.28%) $0.92
LL Flooring Holdings, Inc. Stock Quote
LL Flooring Holdings, Inc.
$6.93 (0.87%) $0.06
Tile Shop Holdings Stock Quote
Tile Shop Holdings
$4.31 (-0.46%) $0.02

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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