What is the Overall Impact of Hurricane Milton on US Stocks and Sectors?

The impact of Hurricane Milton on U.S. stocks and various sectors is significant, with different industries experiencing varying degrees of influence.

As the powerful Category 4 storm approaches the west coast of Florida, financial analysts are closely monitoring and predicting its consequences across multiple sectors.

The Property and Casualty insurance sector is likely to feel the immediate effects of Milton. Analysts from RBC Capital Markets indicate that it could become one of the costliest storms to strike Florida, potentially resulting in tens of billions of dollars in insured losses. High property values in densely populated areas, coupled with anticipated storm surges and inland flooding, are expected to create financial challenges for insurers.

Although many insurance companies may avoid catastrophic capital losses due to this being a fourth-quarter earnings event, the reinsurance and specialty property sectors are predicted to face considerable exposure. With three hurricanes making landfall in Florida this season, there may be stabilization or even a reversal in the recent trends of softening commercial property and reinsurance pricing.

The leisure sector is also affected, with companies like Planet Fitness and Life Time exposed to the storm. According to Morgan Stanley, Planet Fitness has a significant number of corporate locations in Florida, with about 25% of its corporate units situated in the state. However, the company typically employs a franchise model, which generally protects it from transient events like hurricanes, particularly during the current slow season for membership growth. Presently, the financial risks for Planet Fitness appear limited unless prolonged closures affect membership retention and new sign-ups.

Medical technology firms are anticipated to experience a temporary decline in surgical capacity as hospitals in the hurricane’s projected path prepare for evacuations and operational slowdowns. BTIG Research estimates that Florida accounts for approximately 7.3% of the U.S. surgical capacity, and with around 93.5% of the state’s population in the storm’s trajectory, surgical volumes could drop by as much as 6.8% for the quarter if hospitals face ongoing closures. However, most hospitals are expected to gradually resume normal operations, reducing long-term impacts.

Airlines operating in central Florida, particularly budget carriers, are facing significant disruptions. Jefferies reports that about 90% of inbound flights to key Florida airports, including Tampa and Orlando, have been canceled, with low-cost carriers suffering the most. Airlines like Allegiant, Spirit, and Breeze experienced substantial cancellations, while major carriers such as American Airlines, Delta, and United reported minimal disruptions.

Restaurants are especially vulnerable, particularly those with a high percentage of operations in Florida. Barclays notes that companies like First Watch, Bloomin’ Brands, Darden Restaurants, Brinker International, and BJ’s Restaurants have many units in Florida, making them susceptible to traffic declines during the hurricane. Historically, restaurant sales tend to recover after natural disasters, but the cumulative effect of Hurricane Milton and Hurricane Helene earlier in the quarter may significantly impact these companies’ fourth-quarter earnings.

The upcoming landfall of Hurricane Milton is also expected to affect Florida’s utilities, particularly companies like TECO, Duke Energy Florida, and FP&L. With winds reaching 150 mph, power outages and infrastructure damage are likely. In past storms, such as Hurricane Ian in 2022, vast outages affected millions of customers, with total damages in Florida reaching up to $70 billion. However, Florida’s strong regulatory environment allows utility companies to recover prudently incurred storm costs through established recovery mechanisms.

As Hurricane Milton approaches Florida’s Gulf Coast, the insurance industry faces another major test. The lessons learned from Hurricane Andrew in 1992, one of the most catastrophic hurricanes in U.S. history, are fresh in the minds of industry players. Historical data shows that, following Hurricane Andrew, reinsurance stocks initially dipped but then rebounded robustly, particularly as pricing in the sector increased sharply after the event.

As insurers prepare for significant losses, the expected rise in reinsurance pricing may offer a much-needed buffer, highlighting the industry’s resilience. Across various sectors—from airlines to restaurants and utilities—the impact of Hurricane Milton is projected to be widespread yet manageable over the long term, thanks to regulatory frameworks and market adjustments.