What Wall Street Is Watching as Hurricane Michael Nears Florida

(Bloomberg) -- Investors are tracking Hurricane Michael as it barrels toward Florida with winds strengthening to 145 miles per hour, posing potential consequences for companies in the building, hospital, insurance and energy industries, among others. The Category 4 storm, poised to be the strongest to hit the continental U.S. since 2004, is expected to make landfall Wednesday and could cause $16 billion in damage.

Here’s a recap of what stocks Wall Street is watching:

Building Products

  • Building-products stocks including Beacon Roofing Supply and Owens Corning may rise on Wednesday given the increase in the storm’s intensity, as high winds should spur re-roofing demand, MKM analyst Megan McGrath wrote in a note to clients
  • Builders FirstSource and BMC Stock Holdings may also benefit from distribution of wood construction products when re-building begins
  • Storms typically have a negative impact in the short term since building-products firms often need to temporarily close locations for safety reasons; the positive impact is probably a quarter or so away

Hospitals

  • About 3 percent of HCA Healthcare and Community Health Systems hospital beds for critically-ill patients are in the coastal areas where residents have received official warnings about Hurricane Michael, Evercore ISI analyst Michael Newshel wrote in a Tuesday note
    • 5 percent of HCA beds are in the potential path of the storm, while 4 percent of Community Health and 1 percent of Universal Health Services beds are in the hurricane’s projected path
    • Earnings risk from Michael seems “significantly lower” than from Hurricanes Harvey and Irma, which hurt third quarter 2017 Ebitda by 3 percent to 12 percent, “though many hospital companies had facilities in the path of Hurricane Florence in September as well”
  • Leerink’s Ana Gupte said any effect on hospital companies appears “manageable”
    • Community Health, HCA and Universal Health have less than 0.5 percent of fourth quarter and 2018 estimated Ebitda with 1 percent to 5 percent of beds that may be affected by the storm; Tenet Healthcare has no acute facilities in the hurricane’s path, while Acadia Healthcare has one clinic that may be affected
    • Fourth quarter usually has the most elected surgeries, but in her view “procedures could be rescheduled before the quarter’s end to offset the disruption”

Insurance

  • Even as a Category 4 storm, the worst case for insurers is probably losses in the “low double-digit billions of dollars,” Wells Fargo’s Elyse Greenspan said in a Wednesday note
    • Stocks that may come under pressure include reinsurers Axis Capital, Everest Re, RenaissanceRe and AIG, and Florida-focused homeowners’ insurers Heritage, Federated National, Universal Insurance, HCI and United Insurance
    • Other exposed insurers include Allstate, Assurant, Berkshire, Chubb, CNA, National General, Progressive, Travelers
    • Greenspan had also noted in an Oct. 8 report that if the storm strengthens, reinsurance stocks may face the most pressure, since Florida is a heavily reinsured market; the hurricane is unlikely to impact the reinsurance pricing environment
  • Damage may total $5 billion to $15 billion, Bloomberg Intelligence insurance analyst Jeffrey Flynn wrote in a note, citing a review of past storms and Kinetic Analysis estimates

Energy/Utilities

  • Gulf operators shut 670.8k b/d of oil production ahead of Hurricane Michael, BSEE said in a notice
    • 726mmcf/d gas production shut-in
    • 75 platforms evacuated
  • See here for Michael’s path and oil assets in the Eastern Gulf Coast, including Chevron’s Pascagoula refinery
    • Exposed energy stocks include Anadarko Petroleum; the company said Monday night it is "carefully monitoring the weather conditions" in the region, and has removed all personnel and shut-in production at its operated Horn Mountain and Marlin platforms
      • All other Anadarko operated and producing platforms remain on production
    • Exposed utilities include Duke Energy; Duke expects damage to its infrastructure, which may result in extended power outages 

Other Stocks to Watch

  • During previous storms, investors have seen impacts to industries including home improvement, hotels, retail, trucking, railroads, and airlines
  • Click here to see some of the most hurricane-exposed stocks by sector

©2018 Bloomberg L.P.