Why Trex Company Inc (NYSE: TREX) stock is crashing

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Trex Company Inc (NYSE: TREX) stock lost over 7.1% on Feb 15th, 2019 (as of  9:47 am GMT-5 ; Source: Google finance). For the first quarter of 2019, the firm sees net sales of $176 million, or 3% ahead of the first quarter 2018. This lower than expected outlook dampened the sentiment on the stock. Capital spending requirements are projected to be approximately $45 million.

TREX reported the net income of $25 million, up 38% from $18 million reported in the fourth quarter of 2017. Approximately, 75% of this growth was attributed to the strong operating performance with the remainder due to a lower tax rate of 23.2% compared to 27.9% in the year ago quarter.

TREX in the fourth quarter of FY 18 has reported the adjusted earnings per share of 43 cents, while adjusted revenue growth of 15 percent to $140 million in the fourth quarter of FY 18. Trex Residential Products net sales amount to $122 million representing 11% organic growth. This growth was all volume driven demonstrating the strong demand that we are seeing for our decking and railing products. Residential sales growth benefited from continued favorable market conditions in the remodeling sector, strong consumer demand, expanded international sales and our marketing program aimed at taking market share from wood. Trex Commercial Products contributed $18 million to the quarter, up 43% from the year ago quarter.

Consolidated gross margin in the fourth quarter increased 110 basis points year-over-year to 42.8% compared to 41.7% reported in the fourth quarter of 2017. Trex Residential Products gross margin expanded by 50 basis points to 46.4% driven by ability to source greater variety of the scrap polyethylene material and other cost efficiencies. These factors more than offset inflationary impacts and costs related to the rollout of our new products, Enhance Basics and Enhance Naturals. Trex Commercial Products gross margin increased to 18.4% from a 5.2% in the year ago quarter due to improved execution and cost reduction initiatives.

Trex had continued to execute on its long-term capital allocation priorities in the fourth quarter, funding organic growth projects and repurchasing 209,000 shares for $12 million as part of the share buyback program approved in February 2018. For the full year 2018, Trex had repurchased 459,000 shares for $25 million

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