Hurricane Sandy's Winners and Losers List

By Bristol Voss  NOV 01, 2012 3:55 PM

Mother Nature's "reset" has strengthened the outlook for some sectors while weakening others.

 


MINYANVILLE ORIGINAL As if things weren’t uncertain enough after a long, drawn-out recovery/recession -- and while we are coming up on a pivotal presidential election and looming fiscal cliff -- leave it to Mother Nature to hit the giant “reset” button to shake things up. In the aftermath of Hurricane Sandy, virtually the entire population of the US Northeast and the upper Atlantic Coast has had to shift course to at least some degree from the pre-storm days, and many consumers are now focused on big issues that didn’t exist before, such as how to survive or where to live, or on new more mundane topics, such as simply how to get to work.

This reset has created some new winners and loser in its wake.

With 5 million to 6 million households suddenly unplugged, radio emerged as an unexpected winner, at least for the short term. “There is no doubt that the New York broadcast system continued to function and provide life-saving information during Hurricane Sandy. In many areas, it was the only service available to connect the community with first responders,” said David Donovan, President of the New York State Broadcasters Association. Both ABC, owned by Walt Disney (NYSE:DIS), and CBS NYC:CBS) operate radio stations in the area.

More media buys (especially political ads) are expected to be sent to radio at the expense of other vehicles such as broadcast or print. That boost is likely to be short-lived for the companies that produce content sold against advertising verus subscription or satellite radio.

Two-thirds of new cars are now equipped with receivers for satellite radio, which means that consumers no longer have to purchase and install the equipment necessary to receive satellite radio. (However, they will still have to pay the monthly fees for ad-free listening.) Sirius (NASDAQ:SIRI) is poised to capitalize on this trend as is Apple (NASDAQ:APPL).  The world’s biggest music retailer (with 400 million iTunes accounts) plans to launch a streaming radio competitor to Pandora next year.

Another group in the short-term winners category that should have a considerably longer run than radio will be hardware and building supplies. A Sears (NASDAQ:SHLD) spokesman quoted in USA Today said merchandise was “flying out the door” and more than 100 truckloads of generators, chainsaws, pumps, flashlights, batteries, and lanterns were headed east. Sears was up 2% in trading today. Home Depot (NYSE:HD), which extended its hours pre-storm, saw a nearly 5% bump to its stock by Wednesday, and is up another 1% today.  Lowe’s (NYSE:LOW) saw a similar boost. Anything related to survival and recovery has done well.  Generac Holdings (NYSE:GNRC), which makes generators, climbed 9% this week, although it is flat today. United Rentals (NYSE:URI) is up 2% today.

Long term, homebuilders should benefit since a large portion of the population will be unexpectedly rebuilding their homes. This should boost Toll Brothers (NYSE:TOL), which was coincidentally named 2012 Builder of the Year by Professional Builder Magazine today. TOL is trading up 1.50% today. Competitors Lennar (NYSE:LEN) and KB Home (NYSE:KBH) are up 2% 3.50% respectively.

Homes weren’t the only things that will be replaced; many cars and vehicles were damaged or ruined. On the assumption that these vehicles are going to be replaced, it looks like GM (NYSE:GM) and Ford (NYSE:F) might do well in the fourth quarter of this year and the first quarter of next year. Neither was showing a bump up in trading today.

The list of losers is also long and varied. Perhaps the biggest future loser is Consolidated Edison (NYSE:ED), which is facing the largest clean-up in its history. It’s impossible to say what expenses the utility will face in total costs for restringing wires and repairing the above and below ground power systems. As many as 8.5 million homes and businesses lost power in the 15 states affected, said the US Energy Department. Other utilities that will face higher bills and lower revenues include Ohio-based FirstEnergy (NYSE:FE), New Jersey-based Public Service Enterprise Group (NYSE:PEG), Massachusetts-based Northeast Utilities (NYSE:NU), and Washington, DC-based Pepco Holdings (NYSE:POM) whose Atlantic City Electric subsidiary represents 25% of the company’s customer base.

Atlantic City itself suffered substantial damage, although its 12 casinos have begun re-opening. One gaming analyst at Deutsche Bank projected “lost gambling days” due to the storm could pull revenues down 20% year-over-year.

Longer term, however, the die may have already been cast. Atlantic City’s gambling industry also faces some non-storm related issues, namely the new casinos and gambling spots that have opened up in New York, Pennsylvania, and Maryland. From 2006 to 2011, the New Jersey resort city’s gambling revenues fell more than 36%, according to the Center for Gaming Research, University of Nevada.

Other losers include the airlines and rail carriers. Airlines such as American Airines (PINK:AAMRQ) were forced to cancel more than 12,000 flights. CSX (NYSE:CSX), the largest rail carrier in the east, had to suspend service as did privately-owned Amtrak.

Among the expected losers will also be non-essential consumer goods, which could derail fourth-quarter earnings expectations for many sectors including apparel and toys. Another sector that might have a hard time recovering is discretionary retail, including companies such as Tiffany’s (NYSE:TIF) and Saks (NYSE:SKS). The market isn’t betting against the sector quite yet, though -- TIF was up 5.40%, SKS was up 2.40% and mid-level retailer Macy's (NYSE:M) was up 5.5% in trading today.

As for insurers, the “1,000-mile storm,” as one Liberty Mutual spokesman called it, could cost them up to $50 billion. Liberty Mutual is owned by policy holders, not shareholders. Allstate  (NYSE:ALL) and Travelers (NYSE:TRV) were down 2.70% and 1.25% respectively today.
No positions in stocks mentioned.