Trex Company, Inc. Stock Up 10% on Earnings, Guidance

By Markets Fool.com

What: Shares of alternative wood decking, deck rail, lighting accessory, and recycled polyethylene pellet (remember when it was just decking?) manufacturerTrex Company are up nearly 10% in mid-morning trading on Feb. 23 following the release of the company's Q4 and full-year 2015 earnings report.

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So what: Trex reported sales increased 20% in the fourth quarter and net income was up 57%. Sales growth was pushed up by both a strong "early buy" season as distributors stock up ahead of the spring 2016 deck building season, as well as a mild winter that led to seasonally strong deck building late in 2015.

The profit growth was a product of the company's improved operating leverage tied to a number of cost-cutting and efficiency-improving initiatives the company has undergone over the past year.

For the full year, Trex finished with sales up 13% and net income up 16%. Its share buyback program reduced shares outstanding by about 1 million shares, leading to earnings-per-share growth of 20%.

Now what: Guidance is for about 8% growth in the first quarter, which is more or less in line with what analysts have expected and with the more muted expectations for growth in 2016 management has talked about for the past several quarters. Much of the big growth over the past year or so was a product of major distribution wins, and the company doesn't have any new distribution lined up for another double-digit growth year.

However, management said that it is planning to focus its marketing efforts in 2016 on taking more share away from traditional wood decking, which CEO Jim Cline said makes up 84% of the board linear feet of wood decking sales in the U.S.

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Looking for more? Stay tuned for more in-depth coverage of Trex later today.

The article Trex Company, Inc. Stock Up 10% on Earnings, Guidance originally appeared on Fool.com.

Jason Hall owns shares of Trex. The Motley Fool owns shares of and recommends Trex. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.