It is a story we have covered countless times over the years. Monster hurricanes hit the United States and cause horrific wind and rain damage, and both before and after the storms certain companies are the benefactors of the devastation. While no one likes to profit on the misery of others, the bottom line is that the rebuilding process from huge storms can take years. In fact, the process of rebuilding Houston from last year’s Hurricane Harvey is still underway.
In a new research report, Jefferies gives multiple scenarios for companies in their coverage universe that may be affected by Hurricane Florence. We focused in on the stocks that often see massive sales before the storm, in an effort to lessen the impact, and after the damage is done, in rebuilding efforts. All are rated Buy at Jefferies.
This top consumer discretionary company is in 66% of the top metropolitan statistical areas. At Home Group Inc. (NASDAQ: HOME) currently operates over 100 warehouse-style home furnishing stores in 29 states. The company utilizes low-cost big-box locations (120,000 square feet on average) with five to six times the floor space of competitors to offer over 50,000 stock keeping units (SKUs) per store, with 20,000 new SKUs introduced annually.
In the “fast fashion” of home décor, At Home produces lower-price, lower-quality products that mimic designs of higher-end brands to cater to price-conscious consumers who enjoy frequently changing up the look of their homes.
The Jefferies price target for the stock is $47, and the Wall Street consensus estimate is $43.44. The shares closed Wednesday trading at $33.01 apiece.
Floor and Decor Holdings
Founded in 2000, this is a smaller cap company the Jefferies team also views as a potential beneficiary of storm-related events. Floor and Decor Holdings Inc.’s (NYSE: FND) initial concept focused on buyouts of products, but it has since evolved to direct marketing.
The stores carry all major categories of hard flooring (tile, wood, laminate and stone), along with decorative items and the accessories needed to complete a project. Some 40% of sales are to do it yourself, and 60% are to professionals. The company currently operates 84 stores, and it is targeting 400 or more stores over the long term.
Jefferies has a $478 price target on the shares, and the posted consensus target is $48. The stock closed trading on Wednesday at $37.43 per share.
This company remains the undisputed leader in the home improvement retail category, and a big Hurricane Florence hit could increase third- and fourth-quarter results. Home Depot Inc. (NYSE: HD) is the world’s largest home improvement specialty retailer, with 2,270 retail stores in all 50 states, the District of Columbia, Puerto Rico, U.S. Virgin Islands, Guam, 10 Canadian provinces and Mexico.