Equipment rental companies saw their stock prices rise on Wednesday as investors anticipated that tropical storm Harvey would generate demand.
Shares in United Rentals, the largest equipment rental company, climbed 3.6 per cent to $119.07. It has risen 11 per cent since August 25. Competitors H&E and Herc Holdings were up 1.9 per cent to $23.51 and 1.9 per cent to $42.24, respectively.
The companies provide rental equipment to the construction industry, other companies and homeowners and other individuals.
“When you think about the immediate aftermath of the storms there is not only going to be the emergency response but also a rebuild effort after that which will put increased demand for rental equipment into the market,” said Joseph O’Dea, an analyst at Vertical Research Partners.
The disaster has displaced tens of thousands and damaged the heart of the US energy industry. With estimates of the damage running into the tens of billions of dollars, economists and analysts anticipate a significant rebuilding job in Houston and the surrounding area.
That prospect has helped construction companies. The S&P’s construction materials index is up 7.7 per cent since Aug 25, the last day of trading before Harvey hit. Martin Marietta Materials, which produces materials used in the construction of highways and infrastructure, rose 5.1 per cent to $213.09. Vulcan Materials moved 3.9 per cent higher to $121.08.
Mr O’Dea of Vertical Research added that while there would be benefits to such companies, investors should not overstate it. “We anticipate it to be a tailwind in the quarter but not necessarily a material event,” said Mr O’Dea.
The broader S&P 500 index edged 0.3 per cent higher to 2,452 on Wednesday, buoyed by gains for financials. It has been a testing month for the US stock market, with Thursday’s close likely to herald the first monthly losses for the benchmark S&P 500 index this year, with only utilities and tech — typically seen as defensive stocks — ending August with gains.
The Dow Jones Industrial Average was flat heading into the New York afternoon, while the Nasdaq Composite rose 0.6 per cent to 6,341.
Mondelez International’s share price tumbled as much as 3.6 per cent before bouncing back to trade down 1.6 per cent to $41.24 in early afternoon trading on Wednesday. The move came after Warren Buffett, the billionaire chief executive of Berkshire Hathaway, rebuffed speculation that Kraft Heinz would acquire Mondolez.
Berkshire is the largest shareholder in Kraft, controlling the company alongside 3G. Investors have speculated that Mondelez, the third-largest packaged food and confectionery company after Nestlé and PepsiCo, was a potential target for acquisition after the Kraft Heinz megamerger two years ago.
“I think the answer is no on that,” he told CNBC.