Winners and Losers in Sandy Recovery

NEW YORK ( TheStreet) -- Recent figures from the National Hurricane Center show that hurricane Sandy was the second-costliest in U.S. history, with estimated damages in the neighborhood of $50 billion. This puts recovery costs behind only hurricane Katrina, which created inflation-adjusted costs of nearly $130 billion. To gain some added perspective, Florida's hurricane Andrew in the early 1990s caused damages equal to roughly $44 billion in today's inflation-adjusted dollars.

Now that more than six months have passed since the storm devastated the country's eastern coast, we can start to assess the effects these events will have on stocks, as some sectors are positioned to see substantial increases in product demand during the rebuilding period. Of course, these increases will not extend to all areas of the market so it is important to identify and separate the companies most likely to see increased demand and generate upside surprises in future earnings.

The Winners

When looking at the companies best positioned to benefit from Sandy's rebuilding and recovery efforts, home improvement retailers immediately come to mind. To support this view, some of the largest names in the business have already shown evidence of sustainable strength with better-than-expected earnings results.

Home Depot ( HD) Is perhaps the best example. With a market cap of $109.8 billion, the world's largest home improvement retailer last reported quarterly earnings of 67 cents per share. This marks a 32% improvement from the 50 cents per share seen the previous year, driven by a 14% increase in sales. The company's 24.6 price-to-earnings ratio and recent 34% dividend increase give the stock a strong investment position within the sector, and recent analyst upgrades suggest significant upside potential in the stock through the remainder of the year.

Home Depot houses a wide variety of building supplies including tools, appliances and paints (in addition to basic construction materials), and increasing sales in each of these areas supports the general picture for long-term bullishness.

By extension, watch for continued upside in Whirlpool ( WHR), which continues to exhibit solid financial positioning and an impressively stable performance in its stock price. The home appliance company trades with a P/E of 16.9, and reported first quarter net income at $252 million ($3.12 per share). This is a 63% increase from the $92 million ($1.04 per share) seen the previous year. Earnings benefited from an advantageous U.S. energy tax, and the company recently announced a quarterly dividend of 62.5 cents per share ($2.5 annualized). This is an increase of 25% from the previous dividend offering (50 cents), and investors can now capitalize on an annual dividend yield of 2.2%.

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