Markets
ACM

What's in Store for Trex Company (TREX) in Q3 Earnings?

Trex Company, Inc.TREX is scheduled to release third-quarter 2018 results on Oct 29, after the closing bell. In the last reported quarter, the company's earnings surpassed the Zacks Consensus Estimate by a margin of 14.1%.

How are Estimates Faring?

Let's take a look at the estimate revision trend in order to get a clear picture of what analysts are thinking about the company prior to the earnings release. For the quarter to be reported, the Zacks Consensus Estimate is pegged at 53 cents, remaining flat over the past 30 days. This reflects a gain of 55.9% from 34 cents in the year-ago quarter. Revenues are expected to be $173 million, up 23.4% year over year.

Trex Company, Inc. Price and EPS Surprise

Trex Company, Inc. Price and EPS Surprise | Trex Company, Inc. Quote

Factors at Play

Trex Company, the manufacturer and distributer of wood/plastic composite products, and related accessories primarily for the residential and commercial decking, and railing applications in the United States, is expected to record higher sales in the third quarter courtesy of strong residential business. The company's residential business continues to benefit from high consumer confidence levels, along with increasing repair and remodeling spend.

This positive environment and brand leadership resulted in a 24.8% increase in Trex Company's sales in the first six months of 2018. Notably, the company's Residential business' (accounting for about 91% of total sales) net sales grew 13.8% in the said period. The second quarter marks the 11th straight quarter of record revenues, and also the sixth consecutive quarter of record revenues and earnings.

Trex Residential Products is capturing an increasing share of the wood market, aided by continued investments in product development activities, branding and marketing programs.

Meanwhile, Trex Commercial Products (contributing the remaining 9% of sales) has also been performing impressively, according to plans, winning new projects and positioning it well for the second half of 2018 on solid backlog.

For the third quarter, the company expects consolidated net sales of $173 million, of which Trex Residential Products ought to contribute $154 million and Trex Commercial Products should account for $19 million.

The company has adapted supply-chain management practices to accelerate purchases, in order to overcome the tight freight market. Despite raw material inflation, increased product innovation costs and higher freight expenses, Trex Company has been registering higher margins backed by lower cost recycled materials, increased capacity utilization and cost-saving initiatives. The trend is expected to continue in the third quarter as well.

Here is What Our Quantitative Model Predicts:

Our proven model does not conclusively show that Trex Company is likely to beat on earnings in the to-be-reported quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen.

Earnings ESP: Earnings ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, is 0.00%. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter .

Zacks Rank: It currently has a Zacks Rank #1, which increases the predictive power of ESP. However, we also need to have a positive ESP to be confident of an earnings surprise.

Meanwhile, we caution against stocks with a Zacks Rank #4 and 5 (Sell rated) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

You can see the complete list of today's Zacks #1 Rank stocks here .

Stocks With Favorable Combination

Here are some construction companies that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat in the upcoming releases:

Rayonier Inc. RYN has an Earnings ESP of +16.7% and a Zacks Rank #3. The company is slated to report quarterly results on Oct 31.

Century Communities, Inc. CCS has an Earnings ESP of +3.74% and holds a Zacks Rank #3. The company is scheduled to report quarterly results on Nov 6.

AECOM ACM has an Earnings ESP of +0.24% and a Zacks Rank #3. . The company is scheduled to report quarterly results on Nov 12.

Looking for Stocks with Skyrocketing Upside?

Zacks has just released a Special Report on the booming investment opportunities of legal marijuana.

Ignited by new referendums and legislation, this industry is expected to blast from an already robust $6.7 billion to $20.2 billion in 2021. Early investors stand to make a killing, but you have to be ready to act and know just where to look.

See the pot trades we're targeting>>

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

Trex Company, Inc. (TREX): Free Stock Analysis Report

Rayonier Inc. (RYN): Free Stock Analysis Report

Century Communities, Inc. (CCS): Free Stock Analysis Report

AECOM (ACM): Free Stock Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

In This Story

ACM TREX RYN CCS

Other Topics

Earnings Stocks

Latest Markets Videos

Zacks

Zacks is the leading investment research firm focusing on stock research, analysis and recommendations. In 1978, our founder discovered the power of earnings estimate revisions to enable profitable investment decisions. Today, that discovery is still the heart of the Zacks Rank. A wealth of resources for individual investors is available at www.zacks.com.

Learn More