Trex's Price Target Cut By Several Analysts After Q2 Results

Trex's Price Target Cut By Several Analysts After Q2 Results
  • Barclays analyst Matthew Bouley lowered the price target for Trex Company Inc TREX to $53 (a downside of 2.7%) from $63 while maintaining the Equal Weight ratings on the shares.
  • The analyst stated that while de-stocking was anticipated by investors following AZEK Company Inc. AZEK report, the magnitude of the impact on TREX's sales in 2022 with subsequent gross margin pressure and uncertainty around 1H'23 recovery is altogether simply greater than anticipated.
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  • Bouley expects early 2023 volumes to see pressure y/y as early 2022 still saw channel infill.
  • Bouley anticipates that TREX will continue to take steps to flex costs down and expect a greater focus on COGs reductions which does support improving gross margin % in 4Q and into 2023.
  • Stephens analyst Trey Grooms lowered the price target for Trex to $65 (an upside of 19%) from $90 while maintaining the Overweight rating on the shares.
  • The analyst mentions that it's no secret that destocking was taking place, but admittedly, the expected magnitude is surprising and significantly more than expected.
  • The lowered guidance assumes channel inventory is fully reset at minimal levels, as well as reduced sell-through demand, he adds.
  • Grooms states that while the next few quarters will be challenged, the bar is now reset, and he feels that a near worst-case scenario for the medium term is likely out on the table.
  • DA Davidson analyst Kurt Yinger lowered the price target on Trex to $58 from $67 while maintaining the Neutral rating on the shares.
  • The analyst states that the company's Q2 results were "strong." Still, its second-half revenue guidance was 44% below consensus, reflecting the similar channel destocking headwinds.
  • Yinger notes that while the cost reduction initiatives announced by Trex are positive as volumes recover, the company's visibility is challenged.
  • Stifel analyst Stanley Elliott lowered the price target on Trex to $68 from $77 while maintaining the Buy rating on the shares.
  • The analyst states that the second half guidance was lowered due to channel destocking and lower-end market demand.
  • Truist analyst Keith Hughes lowered the price target on Trex to $85 (an upside of 56%) from $90 while maintaining the Buy rating on the shares.
  • Price Action: TREX shares are trading lower by 14.66% at $54.47 on the last check Tuesday.

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