Just a few weeks ago, Hurricane Harvey rocked the Texas coast and the rebuilding is underway. It’s currently estimated that the flood damage and destruction to the overall infrastructure of Houston and the surrounding areas can be measured in the billions. But who stands to gain the most from this rebuild?
It goes without saying, the process of rebuilding will take time and money, and while the true value of the devastation from these events doesn’t have a concrete number yet, there has been an immeasurable outpouring of support.
Jefferies has picked out a few companies that are dealing in these affected areas and stand to benefit the most from the rebuild. The firm tapped Beacon Roofing Supply Inc. (NASDAQ: BECN), Fortune Brands Home & Security Inc. (NYSE: FBHS), Masco Corp. (NYSE: MAS), Owens Corning (NYSE: OC) and USG Corp. (NYSE: USG) as standing to win handily from this hurricane season.
The brokerage firm gave its key takeaway as:
While it is still early to get accurate assessments for Hurricane Irma and damage estimates for Harvey will likely still increase, we believe that each storm could add low-to-mid single digits of incremental demand over 2H17 and 2018 for insulation, roofing and wallboard. Additionally, it gives us further confidence the insulation and roofing price increases will stick. That said, the group has outperformed since August 18, one week prior to Harvey’s landfall.
The Texas Department of Public Safety has been reporting property damage in Texas in the wake of Hurricane Harvey in four categories: affected, minor damage, major damage and destroyed. As of September 10, it is estimated that the number of homes with minor damage is about 147,000, those with major damage is 48,000, and those destroyed were put at 15,000. Additionally, there were 112,000 homes affected. In total, roughly 322,000 homes reported damages, or 10% of the total housing stock in impacted counties.
Using these estimates, we attempted to measure the impact we could see for demand in wallboard (USG), insulation (OC), and roofing (BECN and OC) assuming all “destroyed” homes need to be completely redone, 75% of the homes with major damage would need to be re-done, 20% of the homes with minor damage would need repair, and 10% of the affected homes would need repair.
Shares of Beacon closed most recently at $48.68, with a consensus analyst price target of $53.62 and a 52-week range of $39.50 to $52.12. Jefferies has a Buy rating and a $54 price target on the stock.
Fortune Brands shares were last seen at $64.74. The stock has a 52-week range of $52.05 to $67.50 and a consensus price target of $69.91. Jefferies has a Buy rating and a $78 price target.
Masco closed out the week at $37.31 a share, with a 52-week range of $29.38 to $39.37 and a consensus price target of $42.11. Jefferies has a Buy rating and a $45 price target.
Shares of Owens closed at $75.50. The consensus price target is $75.15, and the 52-week range is $46.45 to $76.84. Jefferies has a Buy rating and a $65 price target.
And USG shares were last seen at $30.38, with a consensus price target of $29.27 and a 52-week range of $23.71 to $34.67. Jefferies has a Hold rating and a $33 price target.