The Weather Channel recently reported that the 2024 hurricane season is likely to be even more active than previously anticipated. Though the destruction left by hurricanes is as heartbreaking as it is devastating, it is an unfortunate reality for many Americans living along the East Coast. This might have some storm-ready investors considering which hurricane stocks to buy. Moreover, the $1.2 trillion Infrastructure and Investment Jobs Act of 2021 allocated more than $50 billion in funding to provide against weather-related incidents like droughts and floods.
As such, a severe hurricane season could lead to a nexus of financial conditions for a few key companies whose business models apply directly to hurricane preparation and recovery. While it may seem like this is profiting from the misfortune of others, it’s important to remember that the driver of most emergency response systems in the U.S. is money. Thus, most investors can rest assured investing in such companies, as their services tend to accelerate relief efforts and improve reconstruction outcomes.
Lowe’s (LOW)
One of the two halves of America’s home improvement duopoly, Lowe’s (NYSE:LOW) tends to see spikes in sales before and after hurricanes. This trend can be attributed to people both trying to prepare for the effects and recover from them on their own. Some analysts speculate that increased sales of sandbags, wood planks, concrete mixes and other general fortification supports are common. Lowe’s even sells things like large battery cells and backup generators, which could see increased demand before a hurricane.
The company’s stock price has seen relative stability year-to-date and currently trades 12% below its 52-week high. It offers a steady dividend of 1.90% for its shareholders and trades at a price-to-earnings ratio of 17.60, which implies it may still have room to grow naturally. Pair this with the potential for a spike in revenue during the hurricane season and LOW stock could provide a lucrative short-term play among hurricane stocks to buy.
Generac Holdings (GNRC)
Widely diversified across several forms of generator technology and power storage, Generac Holdings (NYSE:GNRC) has performed tremendously in the last month despite wider market conditions. The company offers everything from solar power cells to bi-fuel generators and serves both homeowners and business owners with its catalog. The stock is currently at 39.44x for its price-to-earnings ratio, which while higher than the often quoted 25x threshold, is still lower than the electrical equipment’s industry average of 47.28x.
Even better for Generac’s investors, the company’s first-quarter results for 2024 reported a net income of $26 million, or $0.39 per share, as compared to $12 million, or $0.05 per share, for the same period of 2023. This represents a 116% increase year-over-year for the quarter despite relatively stagnant net sales of $888 million. For investors, this means Generac has focused on profitability right before a potential spike in sales, which could lead to some rally-inspiring Q2 and Q3 results this year depending on the severity of the hurricane season.
Fluor (FLR)
One of the stocks with the most exposure to the hurricane industry is Fluor (NYSE:FLR) and its reach has recently gotten bigger. As of February 8, 2024, Fluor is officially the U.S. Federal Emergency Management Agency’s direct support for providing recovery services to its East Zone region. Per FEMA, the East Zone consists of Regions III and IV, which encompass the entire eastern seaboard up to New Jersey.
With large, populous states like Florida, Georgia, North Carolina and Virginia falling under its jurisdiction, the East Zone contract provides Fluor with an exceptional revenue stream in the event of a nasty hurricane season. The contract, which operates on indefinite-delivery/indefinite-quantity has a one-year base period with four, one-year option periods and is valued at up to $525.6 million.
As such, Fluor almost certainly will profit this hurricane season since it has a blank check from the government and because its main competitor for these contracts, AECOM (NYSE:ACM) has fallen out of favor due to the outcome of its recent Hurricane Katrina lawsuit settlement.
On the date of publication, Viktor Zarev did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
