Why Jefferies Sees 5 Big Winners From This Hurricane Season

Hurricane Harvey rocked the Texas coast just a few weeks ago and won’t soon be forgotten. The flood damage and destruction to the overall infrastructure of Houston and the surrounding areas can be measured in the billions of dollars, but Texans are a resilient people and they will rebuild.

Even with Irma ongoing in Florida, we can expect massive fallout from that storm as well. And even past that, there is another hurricane, Jose, making its way through the Atlantic right now.

Needless to say, the process of rebuilding will take time and money, and while the true value of the devastation from these events doesn’t have a number yet, there has been an immeasurable outpouring of support not seen before in the history of the United States. This has come not just from citizens and celebrities, but local and national companies have pledged efforts and cash to the cause.

A few companies dealing in these affected areas, including 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), actually stand to win handily from this hurricane season.

Jefferies has taken a closer look at these five companies that could see a meaningful lift to their demand and pricing from Harvey and Irma alone. 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.

Jefferies chimed in:

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 were last seen down 2% at $49.00, with a consensus analyst price target of $53.31 and a 52-week range of $39.50 to $52.12. Jefferies has a Buy rating and a $54 price target.

Fortune Brands shares were trading down 0.4% at $64.15. 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 was last trading down 0.5% at $37.39, 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 were down 4.6% at $73.25. The consensus price target is $74.60, and the 52-week range is $46.45 to $76.84. Jefferies has a Buy rating and a $65 price target.

And USG shares traded down 4% at $30.90, with a consensus price target of $28.93 and a 52-week range of $23.71 to $34.67. Jefferies has a Hold rating and a $33 price target.