Trex Company, Inc. (TREX) Income Statement

The 2024Q1 surge of 56.5% appears to be a peak, as subsequent quarters show a clear deceleration, with 2025Q4 and 2024Q4 posting declines of 3.9% and 14.4%, respectively. The 2026Q2 growth of 7.8% is modest and may reflect a rebound from a low base, but the overall trend suggests a maturing demand cycle. Investors should monitor whether the company can sustain positive growth in a seasonally weak Q4, which has historically been a trough.

The gross margin decline is consistent across quarters, with 2025Q4 hitting a low of 30.2%, indicating that the company is facing structural margin headwinds. While 2026Q1 and Q2 show some recovery to 40.5% and 37.9%, respectively, they remain below the 2024 levels. This may indicate that TREX is absorbing higher raw material costs or discounting to maintain volumes, which warrants close monitoring of input cost trends and competitive dynamics.

The operating income decline is steeper than revenue decline, with 2025Q4 operating margin at just 2.2%, reflecting a high fixed-cost base. SG&A expenses have remained relatively stable in absolute terms, around $45-56 million per quarter, even as revenue fluctuates, leading to negative operating leverage during downturns. This suggests that management has limited flexibility to adjust overhead quickly, which could amplify earnings volatility in cyclical downturns.

The increase in COGS ratio suggests that input costs are rising or that the product mix is shifting toward lower-margin items. SG&A expenses have grown by 33% from 2024Q1 to 2026Q2, outpacing revenue growth of 12% over the same period, indicating that overhead is not being tightly controlled. This could be due to investments in sales and marketing or administrative inefficiencies, which may compress margins further if revenue growth does not accelerate.