Information Provided By:
Fly News Breaks for January 14, 2020
Jan 14, 2020 | 09:20 EDT
William Blair analyst Ryan Merkel says that Home Depot (HD), according to his contacts, has elected to stay with Fiberon's Veranda as its stocked low-end decking line. The analyst thinks the primary reason is Home Depot's caution around Trex Company (TREX) having enough immediate capacity to fill demand. For Trex shares, the news should not be a major surprise, Merkel tells investors in a research note. Trex is just now catching up on its backlog from 2019, and demand "remains robust" entering 2020, adds the analyst. Further, he believes Basics at Home Depot was an "optionality and not the only source of upside versus Street estimates." And Merkel still believes Basics is an opportunity at Home Depot in the future. For Trex's 2020, the major investor focus is supply, not demand, says the analyst. He believes the company's ability to smoothly ramp production will dictate sales. Merkel still thinks Trex can generate 20% sales growth in 2020 and mid-teens growth in 2021. The analyst keeps an Outperform rating on the shares.