Trex (TREX) PT Raised to $95 at JPMorgan

JPMorgan analyst Michael Rehaut raised the price target on Trex (NYSE: TREX) to $95.00 (from $93.00) while maintaining a Neutral rating.

The analyst comments "Following TREX’s 1Q earnings release and conference call, we provide our key takeaways below (pre-call bullets in the body of this note). For 2024, following 1Q sales of $374 million, modestly above guidance of $360-370 million, TREX continues to expect revenue of $1.215-1.235 billion (up 11-13% YOY; prior JPMe: $1.24 billion). Driving this outlook, we believe the company continues to expect sell-through up mid single-digits against a broader repair/remodel market expected to be flat to down low single-digits. Additionally, TREX continues to expect 2024 adjusted EBITDA margin of 30.0-30.5%, up 50-100 bps YOY (prior JPMe: 30.6%), as despite 1Q gross margins of 45.4% being well above our estimate, this metric is expected to moderate for the rest of the year as capacity utilization rates also decline. Lastly, regarding 1Q results, sales rose 57% YOY, above our 54%E and guidance of 51-55%, while adjusted EBITDA margins of 35.6% were solidly above our 32.6%E and up 680 bps YOY. We slightly raise both our 2024E and 2025E Operating EPS to $2.26 and $2.65, respectively, from $2.22 and $2.59, as well as our 2024E and 2025E EBITDA to $386 million and $449 million, respectively, from $379 million and $439 million following 1Q results and reiterated 2024 guidance. As a result, we also modestly increase our Dec. 2024 price target to $95.00 from $93.00. Lastly, we continue to rate TREX Neutral relative to its peers. From a fundamental perspective, we view the company favorably, led by its strong leadership position and above average margins within the composite decking and rail industry, which in turn should continue to gain share from wood for years to come. However,we view the stock’s valuation, trading at roughly 25x our 2024E EBITDA, which represents a roughly 30% premium to its close peer AZEK, as somewhat full on a relative basis."

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