Guess which ASX stock will get an earnings boost from Bomb Cyclones hitting the US

The extreme cold snap hitting the United States is causing misery for many but local investors could be big winners from the Bomb Cyclone attack that has made some parts of the country colder than Mars!

The analysts at Macquarie Group Ltd (ASX: MQG) has upgraded its earnings forecast for Reliance Worldwide Corporation Ltd (ASX: RWC) as they believe conditions are perfect for the supplier of water control products including the push-fit plumbing fittings called Sharkbite.

The stock is rallying 1.6% to a record high of $4.24 in late afternoon trade when the All Ordinaries (Index:^AXJO) (ASX:XJO) is sinking 0.4% into the red.

The broker said that Reliance is enjoying the tailwinds from the “3Ls” thanks to the Bomb Cyclones hitting the country over the New year – Low temperature (sub zero in this case), Longevity (the cold snap lasting for three days or more, and Latitude (with the affected areas in the southerly regions).

The northern regions tend to have good pipe insulation as they are used to very cold weather. But the southern states are far less prepared and are more likely to get issues with their plumbing, such as busted water pipes (Sharkbite is great for fixing this).

The broker spoke to a number of plumbers and plumbing-related retailers and noted that demand “has been extraordinary”.

In fact, demand for plumbing solutions is the strongest in at least two years and another cold snap is likely to hit the US over the next week or so.

This may be a one-off tailwind for the company but it’ll give something extra for shareholders to look forward to during next month’s reporting season mayhem.

This is also enough for Macquarie to justify increasing its share price on the stock to $4.40 from $4.25 and to reiterate its “outperform” rating on the stock.

I am expecting companies with large US exposure to do well this year on expectations of a stronger greenback as they will benefit when translating their US dollar-earnings back into Australian dollars.

Other ASX-listed companies that fall into this category include CSL Limited (ASX: CSL), ResMed Inc. (CHESS) (ASX: RMD), Brambles Limited (ASX: BXB) and Boral Limited (ASX: BLD), just to name a few.

It would seem Reliance will have that extra tailwind from the cyclones to count on.

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Motley Fool contributor Brendon Lau owns shares of Boral Limited and Brambles Limited. The Motley Fool Australia has recommended ResMed Inc. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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