Hurricane Sandy’s Impact On Corporate America: A Sector-By-Sector Analysis

on November 06 2012 4:47 PM

Hurricane Sandy will hit earnings at casinos in Atlantic City and electric utilities in New York and New Jersey, credit agency Moody's Investors Service said Tuesday, while benefit home repair and discount retailers.

“We expect Atlantic City casinos' earnings to drop by at least 25 percent, and they could decline by as much as 50 percent, in the next two quarters,” Keith Foley, senior vice president at Moody's, wrote in a Tuesday ratings note. The agency highlights the recently opened Revel Atlantic City casino and the Marina District Finance Company as most at risk.

Moody's also sees an impact to regional utilities like Consolidated Edison, Inc. (NYSE: ED), Public Service Electric and Gas, and FirstEnergy Corp. (NYSE: FE), owner of Jersey Central Power & Light. These firms will see revenues fall in the fourth quarter due to power outages and restoration costs, Moody's said.

In the telecommunications sector, the hurricane will have the biggest effect on wireline service providers due to equipment replacement, overtime pay and credits to customers for disrupted service. Revenue will decline less than 1 percent in the fourth quarter, Moody's said.

Wireless telecommunications service providers such as Verizon Communications Inc. (NYSE: VZ), AT&T Inc. (NYSE: T) and Sprint Nextel Corporation (NYSE: S) were also hurt, but Moody’s said the loss of cell towers will be offset by increased data revenue, since people relied heavily on their phones during the hurricane.

Home-improvement giants like Home Depot, Inc. (NYSE: HD), Lowe's Companies, Inc. (NYSE: LOW), Lumber Liquidators Holdings Inc (NYSE: LL) and Owens Corning (NYSE: OC) could benefit from the massive rebuilding efforts.

"Building products companies, unsurprisingly, will benefit in the aftermath of the storm, with some reporting stronger-than-usual numbers in 2012's final quarter," Peter Doyle, vice president at Moody’s, wrote in the report.

Building materials companies in affected regions, such as New Enterprise Stone and Lime, will see an uptick in demand over the next few quarters.

Home Depot, which is scheduled to report third-quarter earnings on Nov. 13, will see limited impact from Sandy for the July-September period, Barclays Capital analysts Alan M. Rifkin wrote in a note. However, Rifkin believes Home Depot could see “significant impact” in the fourth quarter as repair spending picks up.

Discount retailers such as Wal-Mart Stores, Inc. (NYSE: WMT) and Target Corporation (NYSE: TGT) will also receive a boost, as will supermarkets, drug stores, battery makers and manufacturers of household appliances and furnishings.

Sandy will have minimal impact on restaurants and is unlikely to affect the credit ratings of media companies, according to Moody’s.

In the airline sector, Bank of America Merrill Lynch analysts have penciled in a loss of $500 million in revenue and $100 million in profits for U.S. airlines. Carriers most exposed to the Northeast, where Sandy hit, include JetBlue Airways Corporation (Nasdaq: JBLU), US Airways Group, Inc. (NYSE: LCC) and Delta Air Lines, Inc. (NYSE: DAL).

Auto sales should rebound toward the end of 2012 and into 2013 after a post-hurricane dip, with a neutral to modestly favorable impact on the earnings of General Motors Company (NYSE: GM), Ford Motor Company (NYSE: F) and Chrysler, according to Moody’s.

In the tech sector, Cisco Systems, Inc. (Nasdaq: CSCO), Juniper Networks, Inc. (NYSE: JNPR), Hewlett-Packard Company (NYSE: HPQ) and Dell Inc. (Nasdaq: DELL) could benefit from spending on replacement equipment, though Moody’s believes the effect will be modest.

Eqecat, which does loss estimates from catastrophes for the insurance industry, believes Hurricane Sandy-related insurance industry losses could reach the $10 billion to $20 billion range. Insurance giants likely to take a big hit include Allstate Corporation (NYSE: ALL), Chubb Corporation (NYSE: CB) and Travelers Companies, Inc. (NYSE: TRV).

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