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Hurricanes Impact on Earnings ETFs?

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Two consecutive hurricanes ravaged America in the third quarter. While hurricane Harvey flooded Houston in late August, hurricane Irma hit Florida in early September. Now, as the companies are readying to release their third-quarter earnings, the impact of the hurricane on corporate earnings is the key cause of investors.

Hurricanes Harvey and Irma probably have caused more than $200 billion in damages, as per an article published on CNBC. Needless to mention, now we will hear CEO’s holding these storms responsible for any poor earnings in the impending calls (read: Top ETF Stories of Third Quarter).

Most-Hurt Sectors

As Houston is the core of the U.S. oil and gas industry, the Harvey impact was deeply felt in the energy markets with several refinery shutdowns. Among the other losers were airline companies due to increased flight cancellations. Insurance stocks fell on the ground, but recouped soon on prospects of rising rate.

Since Caribbean islands are famed for cruise trips, cruise stocks and ETFs deserve a special mention as a loser from Irma. Operators abandoned trips that haven’t left port. Analysts are apprehensive that restaurants may see considerable sales reduction and destruction due to Irma. A Canaccord analyst said that many restaurants have considerable exposure to Florida (read: Hurricane Irma: ETF Winners & Losers).

Texas is the top sales market for Ford (F - Free Report) (F - Free Report) , General Motors’s (GM - Free Report) ’s (GM - Free Report) GMC and Cadillac, Fiat Chrysler’s ’s Ram and Mitsubishi brands, as per an article published on Fox Business. CNBC noted that Houston, ravaged by Harvey, is a key contributor to Texas auto sales, accounting for about 40% of total, with over 500 dealerships. Since vehicles inventory was heavily hurt, some reflections must be on the earnings picture (read: Harvey: Pain or Gain Ahead for Auto Stocks and ETFs?).

Inside Guidance Cuts and Damages

Source: CNBC

Still, a senior research analyst at Thomson Reuters, believes that "the overall impact appears to be minimal" on S&P earnings, as quoted on CNBC. After all, not all sectors were hurt, there were gainers too.

Pickup in construction activities and higher auto sales as hurricane-recovery efforts should boost some sectors too. As per the Earnings Trends issued on Oct 5, 2017, the S&P 500 index is expected to score 2.3% earnings growth in the third quarter on 5% higher revenues. This would follow 11.1% earnings growth in the second quarter on 5.5% higher revenues.

So, investors keen on knowing the impact should follow the movement of WisdomTree Earnings 500 Fund (EPS - Free Report) in the coming days. The fund looks to track the investment results of earnings-generating large-cap companies in the U.S. equity market. WisdomTree MidCap Earnings ETF (EZM - Free Report) and WisdomTree SmallCap Earnings ETF (EES - Free Report) can also be followed.

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