What: Shares of recycled alternative decking manufacturer Trex Company, Inc. (NYSE:TREX) fell as much as 12% in early trading on Oct. 27, before picking up a bit. As of this writing, Trex stock is down around 7%. The company released its third-quarter earnings report before the market opened, with sales and earnings both falling short of the market's expectations. Revenue actually declined from last year.
So what: Trex reported third-quarter net sales of $94 million, a decline from last year's $95.5 million, and net income of $3.7 million, down from $8.9 million one year ago. In short, the drop in sales and profits is the news that's driving Trex's stock down today.
Now what: If you're looking at the long-term, bigger picture, then there's some important context to Trex's results in the quarter to be considered.
To start, last year's third quarter was a bit of an anomaly. Trex had a record quarter, and sales were up more than 30% in the year-ago period, largely due to the extremely harsh -- and extremely long -- winter, which was followed by a spring of severe weather. All of this added up to push the deck-building season, which typically begins in early spring and peaks in early summer, later into the year. Compare that to a relatively mild winter and spring, and Trex didn't see the same push of business into the third quarter as last year.
However, total sales are up more than 10% for the first nine months of the year, and net income is also up 10% so far this year as Trex continues to grow its market share.
Looking for more details? Stay tuned for more in-depth analysis of Trex's quarterly earnings soon.
Jason Hall owns shares of Trex. The Motley Fool owns shares of and recommends 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.