What: Shares of recycled alternative decking manufacturer Trex Company, Inc. (TREX 1.48%) 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.
