Insurance, regional banks, fitness centers, utilities, hospitals and theme parks are among the sectors that could be negatively impacted when Hurricane Milton hits Florida Wednesday night or early Thursday morning.
Here's a look at some of the sectors and stocks that investors should be watching with Hurricane Milton on the way.
Hurricane Milton Update: According to NBC News, Hurricane Milton was downgraded to a Category 4 storm on Wednesday morning. The hurricane is expected to make landfall Wednesday night and could hit some of Florida's most populous areas, including the Tampa Bay area.
Evacuation orders are in place for multiple Florida counties with government officials warning that failure to follow the orders could lead to casualties.
With evacuations taking place, Florida service stations are running out of gas, and there are concerns about charging electric vehicles on evacuation routes.
The constant changes in the storm's path could have a major effect on the damage and potential casualties. A landfall in the Tampa Bay area is seen as the worst-case scenario for the hurricane, as reported by CNN.
Regional Banks: DA Davidson analyst Gary Tenner looked at the regional banks that could be most impacted by Hurricane Milton in a new investor note.
"Based on experience, we would expect the banks in the market to be impacted in multiple ways in the post-hurricane period, including a potential deposit boost related to insurance settlements, elevated near term expenses and provision, with lending opportunities related to rebuilding efforts," Tenner said.
The analyst said banks in the Tampa and St. Petersburg areas could see near-term increased expenses but could see "positive offsets over the longer term."
Based on market share in the region, Tenner highlights the following regional banks:
- Regions Financial (NYSE: RF) : Buy rating
- Fifth Third Bancorp (NYSE: FITB): Neutral rating
- Synovus Financial Corp (NYSE: SNV): Buy rating
- SouthState Corporation (NYSE: SSB): Buy rating
- Cadence Bank (NYSE: CADE): Buy rating
- Hancock Whitney Corporation (NYSE: HWC): Buy rating
"Hospital operators traded slightly lower on Thursday, which we believe reflects at least in part weather-related concerns as Hurricane Milton moves toward Florida's west coast," Hendrix said.
The analyst said hospitals could see "some disruptions to facilities" in the coming days.
RBC highlights the following hospitals in the report:
- Community Health Systems (NYSE: CYH): Outperform rating
- HCA Healthcare (NYSE: HCA): Outperform rating
- Tenet Healthcare (NYSE: THC): Outperform rating
- Universal Health Services (NYSE: UHS): Sector Perform rating
Utilities Impact: Hurricane Milton could have a negative impact on utility stocks, Scotiabank analyst Andrew Weisel warned investors in a new note.
"While we remain bullish on U.S. utility fundamentals and valuations, we're growing somewhat cautious about investor sentiment, which had finally started to turn positive after years of negativity or indifference," Weisel said.
The analyst said they generally caution against trading around storms like Hurricane Milton.
"Rising hurricane activity is no doubt worrisome."
Weisel said the utility sector has several catalysts like rate cuts and the 2024 election, aside from the hurricane impact.
Top utility picks from Weisel are CMS Energy Corporation (NYSE: CMS), WEC Energy Group and DTE Energy Company (NYSE: WEC). After these three top picks, the analyst highlights Southern Company (NYSE: SO), NextEra Energy (NYSE: NEE), Alliant Energy Corporation (NYSE: LNT) and American Electric Power Company (NYSE: AEP) as other favorable utility names.
Weisel also said he would buy Duke Energy Corporation (NYSE: DUK) because of its weakness ahead of Hurricane Milton.
"While outages often lead to lost revenues, slightly weighing on near-term earnings, the impacts are generally very modest," Weisel said.
Another major utility that could be impacted by Hurricane Milton is Tampa Electric, owned by Emera Inc. (OTC: EMRAF). Serving the Tampa Bay area, Tampa Electric is particularly vulnerable to the storm's effects.
Insurance Stocks: The insurance sector is one of the sectors most on watch for the damaging impact and cleanup aftermath from Hurricane Milton.
Insurance stocks like Berkshire Hathaway (NYSE: BRK.A), Allstate (NYSE: ALL), Progressive (NYSE: PGR), Travelers Companies (NYSE: TRV) and Chubb (NYSE: CB) are among the large insurers that could be impacted.
RBC analyst Derald Goh, who covers European insurance stocks, shared a note on the potential damage from the hurricane.
"A potential $60bn industry loss from Hurricane Milton appears very manageable for a sector that is keen to demonstrate stronger earnings resiliency and should drive a re-rating," Goh said.
The $60 billion estimate comes as Hurricane Milton is expected to cause destruction similar to that caused by Hurricane Ian in 2022. Based on the estimated damage from that storm, the analyst considers this estimate the most reliable method for predicting the impact on insurance companies.
Goh said five hurricanes have made landfall in the U.S. this season, and the previous average forecast was 12.
Leisure Sector: Hurricane Milton could also impact theme parks, with the state of Florida home to Disney World, owned by The Walt Disney Company (NYSE: DIS), and Universal Studios Orlando, owned by Comcast Corporation (NASDAQ: CMCSA).
Disney announced it is closing Disney World parks early on Wednesday and transportation services could remain limited, with a plan to re-open on Thursday. The storm may have scared away a large amount of tourists. Goldman Sachs recently said Disney could see a $150 million to $200 million negative impact from Hurricane Milton.
Morgan Stanley analyst Megan Alexander sees Hurricane Milton having a negative impact on fitness centers Planet Fitness (NYSE: PLNT) and Life Time Group Holdings (NYSE: LTH) and indoor golf facility company Topgolf Callaway Brands (NYSE: MODG).
"Overall, PLNT appears to be the most exposed across our coverage particularly given the concentration of corporate locations in the state," Alexander said.
The analyst, who has an Overweight rating and a $84 price target on Planet Fitness, said Florida represents around 25% of corporate-owned locations. Store closures could negatively impact new membership additions, but Alexander added that the monthly membership fee revenue model could insulate the company from a negative impact.
The analyst sees Life Time Group, rated Equal Weight with a $21 price target, having a minimal impact with only five locations in Florida, which is less than 3% of total locations.
Alexander said Topgolf has nine locations in Florida, with five currently closed due to Hurricane Milton. The analyst, who has an Underweight rating and a $10 price target on the stock, said Topgolf will likely see a minimal impact unless locations have severe storm damage and have to be closed for an extended time period.