Trex Shares Tumble as Weak Demand Forces Outlook Cut

Trex (TREX) shares dropped sharply after the composite-decking leader slashed its full-year outlook, signaling a weaker-than-expected environment in both housing and the broader repair-and-remodel (R&R) market. The stock is now down roughly 35% over the last twelve months as investors reassess demand conditions heading into 2026.

Revised Guidance Shows a Demand Reset

Trex now expects full-year net sales of $1.15B–$1.16B, essentially flat year-over-year, compared with its prior forecast of 5%–7% growth. Street consensus heading into the print was around $1.23B, making the reset notably below expectations.

The company also cut its adjusted EBITDA margin outlook to 28.0%–28.5%, down from prior expectations of above 31%.
For Q4, Trex guided for $140M–$150M in revenue — typically a seasonally slow quarter, but still softer than analysts anticipated.

Management cited:

A late-season slowdown in consumer spending
Lower remodeling activity, particularly discretionary outdoor projects
Channel partners keeping leaner year-end inventories
Competitive pressure in composite decking from both branded and private-label options

Q3 Misses Expectations

Trex’s Q3 results also fell short:

Revenue: ~$285M (+22% YoY) vs. expectations near $300M
Adjusted EPS: $0.51 vs. ~$0.57 consensus
Adjusted EBITDA: ~$90M
Gross margin: ~40%

While top-line growth was positive, the company faced pricing pressure, shifting product mix, and lower-than-expected volumes in its core decking business.

Management noted that products launched in the last 36 months now make up ~25% of trailing-twelve-month sales — a positive long-term sign — and that railing category sales remain strong, trending toward double-digit growth in 2025.

Outlook for 2026: Margin Pressure Ahead

Trex signaled that 2026 will come with additional headwinds:

Gross margin expected to contract by ~250 bps next year due to a mix shift (more railing) and depreciation from its expanded Arkansas facility.
SG&A expected to normalize around 18% of sales as the company increases spending on brand, marketing, and product development.
The company also highlighted a $50M share-repurchase authorization, offering some capital-return upside despite the near-term slowdown.

Market Reaction and Sector Read-Through

The stock dropped sharply on the report as the combination of:

A full-year revenue cut
Lower Q4 outlook
Margin compression into 2026
Softer R&R demand

raised concerns that outdoor-living and broader home-improvement categories could remain weak into next year.

Analysts noted:

A potential broader slowdown in home-renovation spending
Increasing competitive pressure in composite decking (notably versus AZEK)
Higher sensitivity to interest rates, delaying big-ticket outdoor projects
Distributors reducing inventory exposure heading into year-end

Some analysts also cut price targets and flagged that Trex’s premium valuation leaves little room for error in a weakening backdrop.