The flood of 2008 was a memorable event. If you pretty much follow the Cedar River down through Iowa (which starts in the central NE part of the state, down through SE part and on into the Mississippi river), you will see many cities seeing 500 year flood damage including some of the biggest cities: Iowa City, Cedar Rapids, Waterloo/Cedar Falls, etc. In all, the state had somewhere around 50,000+ homes affected.
The Iowa flood has proven to be a veritable gold mine for local service industry, where even the least effected house is costing around $7-10k to repair (not including loss of personal items which will take years to replace - if at all). On the top of the list of items replaced are all necessities (requiring immediate purchase) including: new circuit breakers, new water heaters, new washer and/or dryer, new furnace/AC, and new ductwork. In addition, 5-10,000 businesses will need circuit breakers (most electrical service panels are at ground level or in the basement).
Many cities are also using this event to force homes to update their services to current local electrical and building codes. Many other items like shelves, deep freezers, tools, and other personal items lost will create a pending demand for such items for several months to come. Additionally, Iowa utility companies like MidAmerican (MDPWK.PK) have been promoting higher efficiency upgrades by doubling their rebates for flood victims. MidAmerican has also taken this opportunity to swap out all gas meters which have been submerged with new American Meter Company AC-250 meters.
Here are some initial results, but numbers in Waterloo, Cedar Rapids and Iowa City which are all much bigger cities are just now coming into focus…
Nashua – 50 homes flooded
New Hartford – 35 homes destroyed, 80 flooded (15.5 ft crest – 2 ft above historic level of 13.5 ft)
Vinton – (23 ft crest - 4 ft above historic level)
Waverly – population 9,347 had 600 homes flooded, 36 basements collapsed, 16 houses condemned (19.1 ft crest – 2.5 ft above historic level of 16.8 ft)
Necessary Upgrades: Market: Each home will need a new water heater that go for between $300-800
That's: (50k) x $400 = $20 million
Market: Many of the homes will need new washer and dryer that go for between $400-800
That's: (30k) x $500 = $15 million
Market: Each home will need a new furnace and AC that go for around $3,000
That's (50k) x $1,500 = $150 million
Market: Many of the homes will need new duct work that go for around $3,600
That's (30k) x 3,600 = $108 millionSome interesting plays as a result of the flood:
Whirlpool (WHR) – makers of water heaters, washers, dryers, lots of products of interest in the space affected by the floods. WHR should see a spike in sales in Q3 of this year as a result of the flood and the makings of an above average Q4. In 2009, demand has switched to things like deep freezers and other less needed appliances but were items located in the basement.
AO Smith (AOS) – makers of water heaters – more narrowly focused, but brand is very popular. While AOS has been on a short run, its recent earnings don't yet reflect the flood impact. We see AOS likely to report incredible 3Q results (which will be impacted by the Iowa flood) as all the distribution centers in and surrounding Iowa have been completely bought out of water heaters and new water heaters are being purchased directly from the manufacturer. Q4 will see some residual restocking of water heaters by distributors, but during Q4 sales should fall off significantly. Also makers of "lime free" water heaters such as those sold by Sears could also be big sellers. In 2009, I suspect AOS will see dramatic decline in orders as distribution centers are now resupplied and high percentage of items that would have otherwise been replaced (from age), were instead replaced by the flood so that demand has been reduced significantly.
Circuit Breaker Names:
Market: Each home and business has about 20 circuit breakers, which go for between $10-18 each.
That's: (50k+10k) x 20 x $18 = $22 million
Schneider Electric (SU) – Offers Square D brand circuit breakers and electrical panels
Eaton (ETN) – Makers Eaton and Cutler-Hammer circuit breakers and electrical panelsTotal market: $207 million this quarter just for IOWA
Other states are having similar water problems, so this could all add up to a banner year for the above companies!
Other potential benefactors could be Home Depot (HD), Lowes (LOW), and Walmart (WMT) as individual losses ranges from high ticket items that will be replaced by insurance to non-paid replacements (things not covered by insurance). Red Cross, FEMA, as well as community churches have been providing recovery money to help people replace some of these personal items which should have been purchased before the end of 2008.
So what is left that is left to buy from the flood of 2008 that hasn't already been purchased? Mostly storage items, things you keep in the basement, cloths, odds and ends tools, old Christmas gifts never used, college text books, spring cleaning items, spring garden supplies, etc. Some attempted to wash and dry these items to save them, but as flood waters contained raw sewage - most just disposed of them. WMT and to a lesser extent Target (TGT) will see a strong beginning to 2009 - at least in the Midwest as flood victims look to replace after one of the coldest winters of record.