5 storm-stock picks as Hurricane Florence prepares to hit U.S. mainland

 

Hurricane Florence has been downgraded, but it can still be quite devastating. Per electric power company Duke Energy Corporation DUK, heavy rainfall and fierce storms can result in electricity outages for three-quarters of its 4 million customers, particularly in the Carolinas. Many Carolinians are thus in the crosshairs as the deadly storm closes in on them.

While Florence is expected to wreak havoc on the Southeastern coast, insurance, agriculture and restaurant industries are set to bleed. Meanwhile, the hurricane could be a blessing in disguise for companies that supply building products, home improvement retailers, transportation service providers and power generators. Investing in these gainers for the time being, therefore, isn’t a bad proposition.

Florence Nears U.S. Coast

The National Hurricane Center (NHC) warned that even though Florence has been downgraded to a Category 2 hurricane as it nears the U.S. coast late Thursday and Friday, it is still an “extremely dangerous major hurricane.”

The NHC added that “on the forecast track, the center of Florence will approach the coasts of North and South Carolina later today, and then move near or over the coast of southern North Carolina and eastern South Carolina in the hurricane warning area tonight and Friday. A slow motion over eastern South Carolina is forecast Friday night through Saturday night.”

Communities along the North and South Carolina coast prepare for the worst hurricane. More than 10 million residents in North and South Carolina, and Virginia are keeping an eye on the storm. By the way, the track has to some extent shifted south and west, throwing Georgia into a tricky position as Florence moves inland.

Governor Nathan Deal said that “in the light of the storm’s forecasted southward track after making landfall, I encourage Georgians to be prepared for the inland effects of the storm as well as the ensuing storm surge in coastal areas.”

Who Will Take the Hit?

Since Florence is one of the worst storms on record, damage to properties and infrastructure is inevitable. Stock prices of providers of property and casualty homeowners insurance are, thus, taking a beating. Wells Fargo analyst Elyse Greenspan said that insured losses will be in the range of $15 billion to $20 billion. The Progressive Corporation PGR and The Travelers Companies, Inc. TRV are closely tracking the hurricane as they have big exposure to Southeast United States.

Tobacco crops in North Carolina, the biggest U.S. producer, are in the projected path of the hurricane. Matthew Vann, a tobacco extension specialist at North Carolina State University in Raleigh, said that crop losses could reach as high as $30 million once the hurricane makes a landfall.

Restaurants having significant number of locations in the Carolinas are likely to see decline in revenues in the third and fourth quarter. Deadly winds will result in closure of outlets and displace workers. Bojangles’, Inc. BOJA is most exposed to the hurricanes adverse effects as 59% of its store base is in the Carolinas.

Who Stands to Gain?

Unlike the aforesaid stocks, home improvement companies are poised to benefit once Florence makes a landfall. As home owners face damaged properties, likelihood of rebuilding efforts will gain momentum. This, in turn, will drive demand for home-furnishing equipment and building materials.

Some of the home-improvement players like Lowe’s Companies, Inc. LOW and The Home Depot, Inc. HD said that they expect to see their shares scale north in the near term, likely in anticipation of a hurricane-related bump to sales.

Needless to say, transportation and logistics service providers are gaining on relocation and relief supply needs. At the same time, Florence could result in widespread power outages. This, in turn, bodes well for companies that manufacture backup power generation products.

Top 5 Gainers

We have, thus, selected five stocks from the winning areas to boost your returns. These stocks flaunt a Zacks Rank #1 (Strong Buy) or 2 (Buy).

RH RH operates as a retailer in the home furnishings. The company has a Zacks Rank #2. In the last 60 days, 11 earnings estimates moved north, while none moved south for the current year. The Zacks Consensus Estimate for earnings rose 14.6% in the same period.

The company’s projected growth rate for the current year is 149.8%, while the Retail – Home Furnishings industry is expected to rally 13.5%. The company has outperformed the broader industry in the year-to-date period (+51.8% vs +24.4%).

PGT Innovations, Inc. PGTI manufactures and supplies residential impact-resistant windows and doors in the Southeastern United States. The company has a Zacks Rank #1. In the last 60 days, six earnings estimates moved north, while none moved south for the current year. The Zacks Consensus Estimate for earnings rose 17.2% in the same period.

The company’s projected growth rate for the current year is 78.7%, while the Building Products – Miscellaneous industry is expected to rally 23.6%. The company has outperformed the broader industry so far this year (+45.7% vs -3.6%).

Tecnoglass Inc. TGLS manufactures and sells architectural glass, windows, and associated aluminum products in North, Central, and South America. The company has a Zacks Rank #2. In the last 60 days, two earnings estimates moved north, while none moved south for the current year. The Zacks Consensus Estimate for earnings rose 11.9% in the same period.

The company’s projected growth rate for the current year is 106.3%, while the Building Products – Retail industry is expected to rally 26.5%. The company has outperformed the broader industry in the year-to-date period (+29.6% vs +24.3%).

Hub Group, Inc. HUBG provides intermodal, truck brokerage, and logistics services. The company has a Zacks Rank #1. In the last 60 days, 10 earnings estimates moved north, while none moved south for the current year. The Zacks Consensus Estimate for earnings rose 14.7% in the same period.

The company’s projected growth rate for the current quarter is 58.7%, while the Transportation – Services industry is expected to gain 6.2%. The company has outperformed the broader industry in the last one year period (+23.2% vs +11.8%).

Generac Holdings Inc. GNRC designs, manufactures, and sells power generation equipment and other engine powered products. The company has a Zacks Rank #1. In the last 60 days, eight earnings estimates moved north, while none moved south for the current year. The Zacks Consensus Estimate for earnings rose 9.6% in the same period.

The company’s projected growth rate for the current year is 20.9%, while the Electronics – Power Generation industry is expected to rally 10.7%. The company has outperformed the broader industry so far this year (+17.4% vs +4.4%).

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