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Hurricane Ian could boost sales for Home Depot and Lowe’s

Yahoo Finance Live’s Brian Sozzi provides his take on what Hurricane Ian means for Home Depot and Lowe’s.

Video Transcript

JULIE HYMAN: Tropical storm Ian has left over 2 million people without power in the state of Florida. That cleanup will begin shortly in the wake of the storm's devastation. And that could provide a bump in the bottom lines of home improvement chains like Home Depot and Lowe's. This is something that tends to happen after storms, right, Sozz?

BRIAN SOZZI: Yeah, and we saw both shares really got a nice pop. I think it was Lowe's up yesterday, close to 5%. But nonetheless, I will say this. It is incredibly risky to be trading home improvement retailers and other building products makers around storms. So let me just add that caveat.

Now this, I will say this. At a glance, Home Depot and Lowe's in the Southeast operate a large part of their stores. In many respects, this is some of the largest markets they have. Home Depot, 312 stores alone in Florida, Georgia, North Carolina, and South Carolina. Lowe's a little bit bigger presence, having been founded in North Carolina-- 355 stores in those same regions.

This is-- so that puts these storms really in primetime area on where the storm will have tracked. And now consumers going there, trying to rebuild, whether to get flooding out of their basement or get products to rebuild their roofs. You're, obviously, probably going to a Home Depot and Lowe's.

And we've seen a large impact before in the past, like you mentioned, Julie, regarding around big storms. Just go back to the third quarter of 2018. And 2018 overall was an extremely active hurricane season. 15 named storms, eight hurricanes, two major storms, which were defined by category 3, category 4, or category 5, but it primarily Florence and Michael. And in the third quarter of 2018, you saw those sales lifts on the screen from a Home Depot and Lowe's. And of course, the sales slowed off in coming quarters.

But still, when a storm hits, a big storm like we saw with Ian, it will tend to lead to a one quarter sales and profit pop for both of these home improvement companies. And then it tails off as companies-- as people rebuild their homes, and you name it. Overall, like I said, here's my take on this. It's too early to estimate the impact or the lift from Home Depot and Lowe's. You saw the market try to figure it out yesterday.

But like we talked about with Devon Energy, they don't even have an estimate on how much the devastation might cost them. I think you're having a lot of folks try to figure out what it might mean to Home Depot and Lowe's. You'll probably see more analysts come out here on Wall Street, trying to lift their estimates for both companies in the fourth quarter and the first half for next year, as Ian plays out.

JULIE HYMAN: Where's your cartoon?

BRIAN SOZZI: No cartoon today? That's OK.

JULIE HYMAN: Waiting for the cartoon.

BRIAN SOZZI: It's OK.

BRAD SMITH: Yeah, Sozzi's on the job there.

BRIAN SOZZI: I'm a cartoon, and there we go. There's a cartoon right there.

BRAD SMITH: Hard hat Sozz.

BRIAN SOZZI: Yes.

BRAD SMITH: But I mean, it hits twofold, right? And because it could be immediately after the event where people are immediately trying to rebuild and trying to kind of course correct some of the things that have either taken place at the home or on the property. But then there's also the insurance claims side later on, too, and once that finally works its way through the system, too.

BRIAN SOZZI: Yeah, and I left out a name, too, but a company like a Generac, the primary generator maker here in the country. I'm sure they have seen a sizable lift ahead of the storm. And then after the storm, too, we have people say, you know what? I don't want to lose power again. Let me invest the money in a generator so I don't have to go through this.