BB&T Capital upgraded Trex (TWP
) to buy from hold, explaining that the decking producer is going to improve its business in the coming years.
Analyst Joel Havard says Trex's downstream inventory glut of 2005 appears to have been absorbed. He cut his $1.49 2006 earnings per share (EPS) estimate to $1.20, taking factors into account such as higher costs and a lower sales growth forecast. He expects the company's efficiency to recover as its new products begin to sell, however, and initiates a 2007 EPS estimate of $1.95. He has a $32 stock price target and believes the company can make significant strides in recovering previous profitability levels in 2006 and 2007.