Trex Company, Inc. (TREX - Free Report) reported adjusted earnings of 56 cents per share in fourth-quarter 2017, up 30% year over year. Earnings also outpaced the Zacks Consensus Estimate of 54 cents.
Including one-time tax benefit of 6 cents per share, earnings came in at 62 cents compared to 43 cents recorded in the year-ago quarter.
Trex’s total revenues improved 28% year over year to a record $122 million, surpassing the Zacks Consensus Estimate of $119 million. The increase was driven by 15% improvement in Trex Residential Products’ sales, with Trex Commercial Products sales contributing an additional $12.7 million. Upbeat consumer confidence trends, strong demand for Residential Products, and continued support from the company’s channel partners, drove revenue growth.
Cost of sales increased 24.6% year over year to $71 million. Gross profit surged 33.6% to $50.9 million from $38 million reported in the year-ago quarter. Gross margin expanded 170 basis points (bps) to 41.7%. The increase in gross margin was primarily the result of continued raw-material benefits, cost-saving initiatives and increased capacity utilization.
Selling, general and administrative expenses flared up 39.4% year over year to $25.6 million. The company recorded an operating income of $25.3 million in the reported quarter compared to $19.8 million in the year-ago quarter.
Trex reported earnings per share of $3.22 in 2017, up 40.6% year over year. Earnings also beat the Zacks Consensus Estimate of $3.14.
Revenues in 2017 grew 18% year over year to $565 million from $480 million reported in 2016. The figure, however, missed the Zacks Consensus Estimate of $568 million.
Trex recorded cash and cash equivalents of $30.5 million as of Dec 31, 2017, up from $18.7 million as of Dec 31, 2016. Cash flow from operations came in at $102 million in 2017 compared to $85 million recorded last year.
Further, Trex’s Board of Directors approved a new share-repurchase program under which the company might repurchase up to 2.9 million shares.
Trex estimates sales of $172 million for first-quarter 2018, which comprises approximately $157 million from Trex Residential Products and $15 million from Trex Commercial Products. The sales guidance reflects a year-over-year increase of 18.6%.
Trex projects its effective tax rate to be 25% in 2018, down from the 2017 rate of 33%, and predicts incremental margin to be approximately 45%. The company will continue to benefit from lower input costs, process-improvement initiatives and increased capacity utilization.
Share Price Performance
Over the past year, Trex has outperformed the industry it belongs to. The stock has gained around 69.9%, while the industry has recorded growth of 13.2%.
Zacks Rank & Key Picks
Trex currently carries a Zacks Rank #3 (Hold).
Better-ranked stocks in the same sector include Boise Cascade Company (BCC - Free Report) , Louisiana-Pacific Corporation (LPX - Free Report) and PotlatchDeltic Corporation (PCH - Free Report) . All three stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Boise Cascade Company has a long-term earnings growth rate of 18.5%. Its shares have gained 53.8%, over the past six months.
Louisiana-Pacific has a long-term earnings growth rate of 5%. The company’s shares have rallied 24% during the same time frame.
PotlatchDeltic has a long-term earnings growth rate of 5%. The stock has gained 17.5% in six months’ time.
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