Trex stock slides on Q3 earnings miss

Yahoo Finance Live anchors discuss the decline in shares for Trex following third-quarter earnings.

Video transcript

[AUDIO LOGO]

JULIE HYMAN: Let's talk about Trex, shall we? The decking company, products company. Ticker symbol TREX, as you might imagine. Those shares are moving lower by 6%. Third-quarter earnings missed estimates on both the top and the bottom line. Revenue was down 44% from a year earlier, led by a sizable decline in residential sales volumes.

And this makes sense given what we have seen, of course, in the housing market more broadly. Trex is a composite material. It's made with plastic, made with some wood. We've talked to the CEO in the past, they used plastic bags. They recycled plastic bags for some of this material.

Despite that sort of, you know, renewable kind of vibe there, if people aren't replacing their decks--

BRIAN SOZZI: Yeah, no I--

JULIE HYMAN: --then it doesn't-- it doesn't help.

BRIAN SOZZI: I have an affinity for Trex. You know, I helped my dad build his Trex deck. And it was a fun experience. But it is a cool product. I mean, you really don't have to clean it. Doesn't necessarily get dirty.

JULIE HYMAN: It's durable. Yes.

BRIAN SOZZI: It is cool stuff. But I did have to do a double-take looking at these results, make sure I wasn't missing anything. So sales $188 million in this quarter. They were $336 million last year. So sales fell off a cliff.

Guidance not good. And you know, I go back to, I think, it was two weeks ago to Generac. A poor quarter from Generac, warning about inventory. Here's another building product supplier with not a good quarter. I'll even add Whirlpool in there as well. Not a good quarter from these companies.

I'm starting to get concerned about a Home Depot and Lowe's. I'm gonna have a little more on Home Depot in just a minute. But still, not a good quarter from Trex.

BRAD SMITH: Rising expenses also hitting the company here. And that at a time where you had pointed out some of the revenue issues there. And so particularly here for Trex, it's been a dismal year. I mean, the company is down in the stock price, at least, to the tune of about 65%, 66%.

And the larger question, too, of where you start to regenerate some of that demand for decking, for railing, all of the other kind of recycled materials that are being used. And I'll you know, give them a pat on the back for that because, hey, sustainability.

But at the end of the day, too, it's with a larger market right now that is seeing perhaps that slowdown, not just in new home starts or home purchases but also the number of people that are taking on those DIY projects perhaps starting to wane a little bit. That's something where it would directly impact Trex as well.

BRIAN SOZZI: Did you realize that they sold Cornhole?

BRAD SMITH: I did not--

BRIAN SOZZI: I did not.

BRAD SMITH: --until you said it this morning.

BRIAN SOZZI: That is a high class Cornhole--

BRAD SMITH: Polish Cornhole.

BRIAN SOZZI: --apparatuses that they're selling. Much better than the one that Dave Briggs has his desk upstairs. You know, a little raggedy.

BRAD SMITH: He has Cornhole at his desk?

BRIAN SOZZI: I'm sorry, Dave Briggs, it's a little raggedy. It's on his desk.

JULIE HYMAN: Well, the one other thing I was gonna say is, whether you're talking about Trex or about Generac-- which by the way, is another one of the worst performers in the S&P this year-- we talked in advance of this quarter and advance over the past couple of quarters, about the pull forward effect because of the pandemic. We talked about it. And we talked about it. And we talked about it.

And yet now that it is really here and in evidence, it just feels much worse even than was anticipated or we're somehow caught off guard even though we have talked about it so much. Everybody did their decks already. You can't do the deck twice.

BRIAN SOZZI: Yeah.

JULIE HYMAN: Everybody bought their generators already. They don't need another one.

BRIAN SOZZI: Don't need another deck.

JULIE HYMAN: Right? And that is happening with so many different areas. And we continue to see that in these earnings numbers.