Q3 Home Construction Materials Earnings Review: First Prize Goes to Trex (NYSE:TREX)

December 24, 2024 at 04:01 AM EST

TREX Cover Image

Let’s dig into the relative performance of Trex (NYSE: TREX) and its peers as we unravel the now-completed Q3 home construction materials earnings season.

Traditionally, home construction materials companies have built economic moats with expertise in specialized areas, brand recognition, and strong relationships with contractors. More recently, advances to address labor availability and job site productivity have spurred innovation that is driving incremental demand. However, these companies are at the whim of residential construction volumes, which tend to be cyclical and can be impacted heavily by economic factors such as interest rates. Additionally, the costs of raw materials can be driven by a myriad of worldwide factors and greatly influence the profitability of home construction materials companies.

The 12 home construction materials stocks we track reported a mixed Q3. As a group, revenues missed analysts’ consensus estimates by 0.9%.

Amidst this news, share prices of the companies have had a rough stretch. On average, they are down 9% since the latest earnings results.

Best Q3: Trex (NYSE: TREX)

Addressing the demand for aesthetically-pleasing and unique outdoor living spaces, Trex Company (NYSE: TREX) makes wood-alternative decking, railing, and patio furniture.

Trex reported revenues of $233.7 million, down 23.1% year on year. This print exceeded analysts’ expectations by 3.7%. Overall, it was an exceptional quarter for the company with an impressive beat of analysts’ EBITDA estimates.

“Our third quarter results were ahead of our expectations led by sustained consumer demand for our premium-priced products, for which we estimate sell-through increased by high-single digits year-on-year and contractor lead time continued to average 6 to 8 weeks. As anticipated, sell-through of our lower-priced products was below last year’s levels, consistent with a pullback in spending by consumers in this segment, although the decline was sequentially stable and less pronounced than we had expected. During the third quarter, our channel partners reduced their inventory levels by approximately $70 million, in line with our expectations and seasonal demand trends. Our strong EBITDA margin in the third quarter reflected the benefits of our continuous cost-out programs, which partially offset the impact of lower utilization rates, as well as lower SG&A expenses,” said Bryan Fairbanks, President and CEO.

Trex pulled off the biggest analyst estimates beat but had the slowest revenue growth of the whole group. Unsurprisingly, the stock is up 6.7% since reporting and currently trades at $70.97.

Is now the time to buy Trex? Access our full analysis of the earnings results here, it’s free.

Quanex (NYSE: NX)

Starting in the seamless tube industry, Quanex (NYSE: NX) manufactures building products like window, door, kitchen, and bath cabinet components.

Quanex reported revenues of $492.2 million, up 66.6% year on year, in line with analysts’ expectations. The business had a very strong quarter with a solid beat of analysts’ EBITDA estimates.

Quanex achieved the fastest revenue growth among its peers. Although it had a fine quarter compared its peers, the market seems unhappy with the results as the stock is down 13.4% since reporting. It currently trades at $25.04.

Is now the time to buy Quanex? Access our full analysis of the earnings results here, it’s free.

Weakest Q3: JELD-WEN (NYSE: JELD)

Founded in the 1960s as a general wood-making company, JELD-WEN (NYSE: JELD) manufactures doors, windows, and other related building products.

JELD-WEN reported revenues of $934.7 million, down 13.2% year on year, falling short of analysts’ expectations by 5.6%. It was a disappointing quarter as it posted full-year revenue guidance missing analysts’ expectations.

JELD-WEN delivered the weakest full-year guidance update in the group. As expected, the stock is down 41.8% since the results and currently trades at $8.23.

Read our full analysis of JELD-WEN’s results here.

Simpson (NYSE: SSD)

Aiming to build safer and stronger buildings, Simpson (NYSE: SSD) designs and manufactures structural connectors, anchors, and other construction products.

Simpson reported revenues of $587.2 million, up 1.2% year on year. This number met analysts’ expectations. More broadly, it was a disappointing quarter as it produced a significant miss of analysts’ EBITDA and EPS estimates.

The stock is down 9.8% since reporting and currently trades at $168.

Read our full, actionable report on Simpson here, it’s free.

Gibraltar (NASDAQ: ROCK)

Gibraltar (NASDAQ: ROCK) makes renewable energy, agriculture technology and infrastructure products. Its mission statement is to make everyday living more sustainable.

Gibraltar reported revenues of $361.2 million, down 7.6% year on year. This result was in line with analysts’ expectations. Taking a step back, it was a mixed quarter as it also produced full-year EPS guidance slightly topping analysts’ expectations but EBITDA in line with analysts’ estimates.

The stock is down 9.2% since reporting and currently trades at $59.11.

Read our full, actionable report on Gibraltar here, it’s free.

Market Update

Thanks to the Fed's series of rate hikes in 2022 and 2023, inflation has cooled significantly from its post-pandemic highs, drawing closer to the 2% goal. This disinflation has occurred without severely impacting economic growth, suggesting the success of a soft landing. The stock market has thrived in 2024, spurred by recent rate cuts (0.5% in September and 0.25% each in November and December), and a notable surge followed Donald Trump's presidential election win in November, propelling indices to historic highs. Nonetheless, the outlook for 2025 remains clouded by the pace and magnitude of future rate cuts as well as potential changes in trade policy and corporate taxes once the Trump administration takes over. The path forward is marked by uncertainty.

Want to invest in winners with rock-solid fundamentals? Check out our Top 5 Growth Stocks and add them to your watchlist. These companies are poised for growth regardless of the political or macroeconomic climate.

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