What Happened?
Shares of composite decking and railing products manufacturer Trex Company (NYSE: TREX) fell 27.2% in the morning session after the company reported disappointing third-quarter 2025 financial results and provided a weak forecast, leading to several analyst downgrades.
The company announced third-quarter net sales of $285.3 million and adjusted earnings per share of $0.51, both of which fell short of analyst estimates. Management pointed to weaker-than-expected market conditions in the repair and remodel sector as a reason for the shortfall. Looking ahead, Trex provided a concerning outlook, forecasting fourth-quarter sales between $140 million and $150 million. This guidance was significantly below analysts' estimates of approximately $199 million, signaling a continued slowdown. In response to the news, multiple analysts lowered their ratings on the stock. BofA Securities downgraded Trex to Underperform from Buy, William Blair downgraded it to Market Perform, and Deutsche Bank cut its rating to Hold from Buy.
The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks. Is now the time to buy Trex? Access our full analysis report here.
What Is The Market Telling Us
Trex’s shares are quite volatile and have had 18 moves greater than 5% over the last year. But moves this big are rare even for Trex and indicate this news significantly impacted the market’s perception of the business.
The previous big move we wrote about was 23 days ago when the stock gained 3% on the news that an analyst at Goldman Sachs kept a Buy rating on the stock, even while lowering the price target.
The analyst reduced the price forecast for the company's shares to $73.00 from a previous target of $83.00. Despite the cut, the decision to hold the Buy rating suggested continued confidence in the company's outlook. This positive signal appeared to outweigh the lowered price expectation for investors.
Contributing to the positive momentum, the major indices rebounded as signs of easing trade tensions between the U.S. and China emerged over the weekend. The tech-focused Nasdaq Composite jumped around 1.7%, while the S&P 500 gained 1.2%. This rebound follows a significant sell-off the previous trading day, which saw the Nasdaq plummet 3.6% and the S&P 500 sink 2.7% after threats of new tariffs heightened fears of a trade war. Investor sentiment improved after the U.S. President adopted a more conciliatory tone toward Beijing in a social media post. The shift in language helped calm market jitters and spurred a broad-based rally as investors welcomed the potential de-escalation of the trade dispute.
Trex is down 50.9% since the beginning of the year, and at $33.49 per share, it is trading 58.1% below its 52-week high of $79.88 from December 2024. Investors who bought $1,000 worth of Trex’s shares 5 years ago would now be looking at an investment worth $432.96.
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