Trex raises 2026 forecast as Q3 sales and profit top estimates

Trex (TREX), the world's largest manufacturer of wood-alternative composite decking and railing, said on Nov. 4 that third-quarter net sales rose 26% to $359.50 million from $285.35 million a year earlier. A regulatory filing showed the company also raised its full-year 2026 guidance.

Adjusted diluted earnings per share were 55 cents, topping the 49-cent consensus estimate. Net sales also topped the $320.24 million consensus estimate.

Here's how the company did:

• Net sales: $359.50 million vs. $285.35 million a year earlier, against a $320.24 million consensus estimate
• Adjusted EPS: 55 cents per share vs. 51 cents a year earlier, against a 49-cent consensus estimate
• Net income: $52.49 million, or 52 cents per diluted share, vs. $51.77 million, or 48 cents, a year earlier
• Adjusted EBITDA: $99.51 million vs. $90.39 million a year earlier

The company said about $30 million of its net sales came from initial distribution load-in. Growth was otherwise led by volume, with minimal benefit from pricing.

Chief Executive Officer Adam Zambanini said, "We delivered an exceptional third quarter as we successfully executed our enhanced distribution strategy, began the ramp-up of our Arkansas manufacturing facility, generated record third quarter revenue, and again increased our full-year outlook."

2026 guidance

The company raised its full-year 2026 net sales forecast to $1.30 billion to $1.31 billion, from the $1.215 billion to $1.25 billion range it gave on Sept. 2. It also raised its adjusted EBITDA expectations to $355 million to $360 million.

For the fourth quarter, the company expects net sales of $175 million to $185 million.

Chief Financial Officer Prith Gandhi said, "We are pleased to raise our full-year guidance, reflecting the strength of our year-to-date execution, continued demand for our products, and confidence in our strategic growth initiatives."

Margins and costs

Gross margin was 36.0%, down from 40.5% a year earlier. The company cited higher diesel prices and higher depreciation from recent capacity investments.

Startup costs at the Arkansas facility were higher than anticipated because of a temporary mechanical issue, which the company said has been resolved. It expects startup costs to moderate as volumes rise. The company said Arkansas should be operating at about 50% of its existing decking production capacity by year-end.

Selling, general and administrative expenses were $56 million, or 15.7% of net sales, up from $45 million a year earlier.

Cash and capital returns

Free cash flow was $134.58 million for the quarter, compared with $139.57 million a year earlier.

In the quarter, the company repurchased about 1.2 million shares for $55 million and repaid $83 million under its revolving credit facility. It anticipates completing its Board-authorized $150 million share repurchase program by year-end, bringing total 2026 repurchases to about $300 million.

Other highlights

The company appointed Brian J. Taylor as its first Chief Commercial Officer, with responsibility for sales, marketing and information technology. It also announced a strategic relationship with Do it Best Group, whose members and True Value retailers now have access to Trex products.

Trex also outlined a strategy to double the business over the next four years.