As the Q2 earnings season wraps, let’s dig into this quarter’s best and worst performers in the home construction materials industry, including Trex (NYSE:TREX) and its peers.
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 slower Q2. As a group, revenues missed analysts’ consensus estimates by 2.4% while next quarter’s revenue guidance was 22.9% below.
Inflation progressed towards the Fed's 2% goal recently, leading the Fed to reduce its policy rate by 50bps (half a percent or 0.5%) in September 2024. This is the first cut in four years. While CPI (inflation) readings have been supportive lately, employment measures have bordered on worrisome. The markets will be debating whether this rate cut's timing (and more potential ones in 2024 and 2025) is ideal for supporting the economy or a bit too late for a macro that has already cooled too much.
Thankfully, home construction materials stocks have been resilient with share prices up 6.4% on average since the latest earnings results.
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 $376.5 million, up 5.6% year on year. This print fell short of analysts’ expectations by 2.9%. Overall, it was a softer quarter for the company with revenue guidance for next quarter missing analysts’ expectations.
“Second quarter sales increased at a mid-single-digit rate led by our premium products, including Trex Transcend® Lineage and Trex Signature® decking, where sell-through continued to track at a double-digit rate and contractor lead-times averaged six to eight weeks,” said Bryan Fairbanks, President and CEO.
Trex delivered the weakest full-year guidance update of the whole group. Unsurprisingly, the stock is down 8.8% since reporting and currently trades at $69.81.
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Best Q2: 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 $986 million, down 12.4% year on year, falling short of analysts’ expectations by 1.4%. However, the business still had a very strong quarter with an impressive beat of analysts’ organic revenue and earnings estimates.
The market seems happy with the results as the stock is up 8.8% since reporting. It currently trades at $15.97.
Weakest Q2: 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 $353 million, down 3.3% year on year, falling short of analysts’ expectations by 5.5%. It was a disappointing quarter as it posted a miss of analysts’ earnings estimates and full-year revenue guidance missing analysts’ expectations.
As expected, the stock is down 11.6% since the results and currently trades at $70.89.
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 $280.3 million, down 6.4% year on year. This result was in line with analysts’ expectations. It was a strong quarter as it also recorded a solid beat of analysts’ Cabinet Components revenue estimates and a decent beat of analysts’ operating margin estimates.
Quanex scored the biggest analyst estimates beat and highest full-year guidance raise among its peers. The stock is up 13% since reporting and currently trades at $28.09.
Hayward (NYSE:HAYW) Credited with introducing the first variable-speed pool pump, Hayward (NYSE:HAYW) makes residential and commercial pool equipment and accessories.
Hayward reported revenues of $284.4 million, flat year on year. This number was in line with analysts’ expectations. Taking a step back, it was a softer quarter with a miss of analysts’ organic revenue estimates.
The stock is up 9.9% since reporting and currently trades at $14.82.
This content was originally published on Stock Story
