Trex Tumbles After Soft Guidance

The stock is slumping 18%.
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Updated from 12:12 p.m. EST

Trex

(TWP)

, a maker of decking and railing, was getting hammered after its outlook was weaker than Wall Street wanted to see.

The company now expects full-year net sales of roughly $320 million to $330 million and earnings of 35 cents to 45 cents a share. Analysts surveyed by Thomson First Call are looking for a profit of 96 cents and sales of $348.2 million.

"The fourth quarter is always a slower period for our industry, and Trex typically reports a loss due to the highly seasonal nature of deck installations," the company said in a statement Wednesday.

"We expect these trends to be even more pronounced than usual in 2006, as distributors and dealers reduce their overall inventories in response to current market conditions," it continued. "In anticipation of this slowdown, we plan to temporarily shut down certain manufacturing lines."

Shares of Trex were dropping 17.3% to $21.84. Trex had sales of $294.1 million and earnings of 17 cents a share in 2005.

The outlook came as Trex reported its results for the third quarter ended Sept. 30. The company had sales of $78.1 million, up slightly from $77.4 million a year ago. It reported net income of $4.6 million, or 31 cents a share, down from $5.2 million and 35 cents a share in last year's third quarter.

Looking to 2007, Trex is targeting revenue of $370 million to $390 million and earnings per share in the range of $1.05 to $1.25, both of which are well below analysts' estimates.