Trex (TWP) Reports Steep Quarterly Loss, Stock Continues Slide

Trex (TWP) the maker of alternative wood decking and railing products reported a steeper than expected loss last quarter of .72/share vs analyst expectations of a .57/share loss.  Revenues were also light, coming in lower than expectations at $29.3 million.  IF there is a silver lining, the 4th quarter is historically a tough quarter for the company, with a loss of 2.75/share last year in the same quarter.  So, relative to last year, it was an improvement. 

Said the CEO, “Although we reported a net loss in the 2008 fourth quarter – as Trex typically does due to the highly seasonal nature of outdoor home improvements – on a pro forma basis, our results improved significantly over the same period in 2007. Our gross margin for fiscal year 2008 climbed to 27.8% or 29.1% on a pro forma basis from 12.0% or 24.1% on a pro forma basis for the 2007 year. Free cash flow for the 2008 year (defined as cash provided by, or used in, operating activities less cash used for capital expenditures) rose substantially to $25.2 million from negative $25.2 million in 2007 and we ended 2008 with a cash balance of $23.2 million, greatly enhancing our financial and operational flexibility in the coming year.

For 2009, the company acknowledged it would be difficult to make forecasts due to economic uncertainty but have established a target of $50 million in sales for the first quarter which reflects a shift in purchasing from its customers to later in the year. 

TWP took out key support levels of the 50 and 200 day moving averages in early February and has been moving down ever since, off 50% in just a few weeks.  The stock is off another 10% today but well off the lows and trying to claw back to reclaim support around 10. 

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