Trex Company, Inc.

Trex Company has been witnessing a decent sequential recovery as it navigates the challenges of the pro-channel inventory recalibration. The company had delivered an all-around beat in its last result as consumer demand for Trex railing and decking remained steady. The residential sales in the quarter were affected by the inventory recalibration in the pro channel urged by concerns over a potential easing in the consumer demand because of declining consumer sentiment, rising interest rates, and expectations of the general slowing in the economy. In recent months, Trex expanded its distribution network in Oklahoma, Texas, and other Southern states. It completed the sales of Trex Commercial Products. In the quarter, Trex reduced production levels and implemented cost-efficiency programs. The company is dedicated to the build-out of the Arkansas facility. Trex doubled the number of color options nationally available for its recently launched collection of Transcend Lineage decking. This includes heat-mitigating technology having a sophisticated color palette and finish. Also, for Trex Decking, it has introduced a tiered warranty structure. The regional launch of the company’s latest decking innovation, named Trex Signature decking, was also announced. We give Trex Company a ‘Hold’ rating with a revised target price.