Lowe’s Companies, Inc. (NYSE:LOW), contrary to what you may have heard, isn’t in a better position because of the recent hurricanes. LOW stock traditionally is unaffected by seasonal storms.
I recently posted some contentious historical data about Home Depot Inc (NYSE:HD). Specifically, I suggested that hurricanes don’t inherently drive meaningful sales or earnings increases despite the repair work and rebuilding that takes shape in the months following these disastrous storms. My chart of Home Depot’s fiscal data, cross-referenced with some of the country’s most damaging hurricanes, made my point.
Still, there’s always room for a second opinion, and there’s no good reason not to put Home Depot rival to the same test and look at its post-hurricane results. I’ll warn you now though, if you recently bought into LOW stock only because you’re expecting a big sales bump over the course of the next few months, prepare to be disappointed.
Crunching the Numbers
I’ll give Lowe’s the human aspect of the company rather than the LOW stock, the same credit I gave Home Depot. As soon as it became clear residents of Texas and then Florida needed supplies to defend themselves from Harvey and Irma, respectively, Lowe’s snapped into action. It delivered 2500 truckloads worth of materials to Florida before Irma hit and has been sending needed items to Texas now that cleanup is underway there.
The retailer has also committed $2 million worth of assistance funding to help hurricane victims all along the Gulf Coast recover from the storms. That’s in addition to several thousand buckets of clean-up supplies already donated by the company, and doesn’t reflect any of the funding the Lowe’s and its employees have passed along to their fellow employees impacted by the storms. Not that the humanitarian effort inherently makes LOW stock more investment-worthy, it certainly doesn’t hurt public support of the home improvement retailer.
Owning stocks isn’t about doing the altruistic thing though. It’s about finding the best risk-adjusted opportunities for growth. And, while Lowe’s stock was touted by many was the natural way to capitalize on the devastation Irma and Harvey unleashed, history once again calls into question the soundness of that logic.
The chart below plots Lowe’s revenue and per-share earnings going back several decades; added are the dates of what are arguably the three most damaging hurricanes (aside from Harvey) during that time. That’s Andrew in 1992, 2005’s Katrina and Sandy in 2012. At least with nothing more than a visual inspection, there’s no apparent bump for the top and bottom line.
To be fair, like Home Depot, the math indicates there was a slight rise in Lowe’s results in late 2012 and early 2013 that could have been partially attributable to post-Sandy rebuilding; growth was slightly above the norm. Caution is advised in concluding that’s all the result of Sandy though. Remember, that was also a time when the housing market was booming again anyway, and much of that above-pace growth spurt may have been in the cards anyway.
Bottom Line for LOW Stock
Again, nobody will ever really know how much of Lowe’s or Home Depot’s business after hurricanes can be attributed to the repair and rebuilding effort. At least some of it is, and perhaps even a lot of it is.
What’s also largely overlooked, though, is the amount of uninsured damage done that never gets repaired. Also ignored is the outright quelling of commerce and closure of companies that directly or indirectly fed business to Lowe’s and Home Depot… business that in some ways is lost forever.
Whatever the case/reason, if you’ve bet the farm that the post-hurricane environment is going to be a boon for Lowe’s, you may want to unwind your LOW stock position sooner rather than later. History isn’t exactly on your side.
As of this writing, James Brumley did not hold a position in any of the aforementioned securities. You can follow him on Twitter.
