Please ensure Javascript is enabled for purposes of website accessibility

Trex Company, Inc. Stock Up 10% on Earnings, Guidance

By Jason Hall – Feb 23, 2016 at 11:00AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The decking manufacturer's stock jumped after releasing a positive earnings report.

What: Shares of alternative wood decking, deck rail, lighting accessory, and recycled polyethylene pellet (remember when it was just decking?) manufacturer Trex Company (TREX -1.06%) are up nearly 10% in mid-morning trading on Feb. 23 following the release of the company's Q4 and full-year 2015 earnings report. 

So what: Trex reported sales increased 20% in the fourth quarter and net income was up 57%. Sales growth was pushed up by both a strong "early buy" season as distributors stock up ahead of the spring 2016 deck building season, as well as a mild winter that led to seasonally strong deck building late in 2015. 

The profit growth was a product of the company's improved operating leverage tied to a number of cost-cutting and efficiency-improving initiatives the company has undergone over the past year. 

For the full year, Trex finished with sales up 13% and net income up 16%. Its share buyback program reduced shares outstanding by about 1 million shares, leading to earnings-per-share growth of 20%. 

Now what: Guidance is for about 8% growth in the first quarter, which is more or less in line with what analysts have expected and with the more muted expectations for growth in 2016 management has talked about for the past several quarters. Much of the big growth over the past year or so was a product of major distribution wins, and the company doesn't have any new distribution lined up for another double-digit growth year. 

However, management said that it is planning to focus its marketing efforts in 2016 on taking more share away from traditional wood decking, which CEO Jim Cline said makes up 84% of the board linear feet of wood decking sales in the U.S. 

Looking for more? Stay tuned for more in-depth coverage of Trex later today. 

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.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Trex Company, Inc. Stock Quote
Trex Company, Inc.
$43.94 (-1.06%) $0.47

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

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 10/03/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.