This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
$1 buys you full access to ALL of TheStreet's Subscription Services! Learn More

6 Stocks Benefiting From Lower Gas Prices

Stocks in this article: ORLYAAPCVXXOMFDODLTR

BOSTON ( TheStreet) -- Prices at the gas pump have tumbled 14% since April thanks to lower crude oil prices, which bodes well for a handful of companies' stocks, a couple of the domestic oil industry's biggest players, and four niche retailers that typically benefit from low- and middle-income consumers efforts to trim spending in uncertain economic times.

Many may find it hard to believe, but the average price for regular gasoline at U.S. filling stations is down about 20% from last summer, at a current average price of $3.41 per gallon nationally, according to The Lundberg Survey, and well off the high this year of $3.97 per gallon reached on April 6.

S&P Capital IQ analysts recently took a look at what companies are likely to prosper in this environment and came up with six picks.

Given the price sensitivities of the industry, earnings of integrated oil and gas companies -- that is those involved in everything from exploration and production to refining and marketing -- are expected to jump. As a result, their shares are up an average 27.3% this year, three times that of the S&P 500's 9.1% gain, making it one of the best-performing industry sub-sectors S&P tracks.

That gain is a result of the curious vagaries of oil industry pricing that clearly favor the seller.

"When crude prices are rising, pump prices will likely go up faster," said S&P Capital IQ equity analyst Michael Kay. "On the way down, retailers will likely take longer to cut pump prices because the gasoline was purchased at a higher price and many stations want to charge more than what they paid. However, if crude keeps falling, we think gasoline prices will likely follow."

Not surprisingly, two oil industry leaders that have all the bases covered given their balance between exploration and production and refining and marketing assets: Chevron (CVX) and ExxonMobil (XOM). These are top stock picks of analysts with at least nine "buy" ratings each.

"We think in a time of volatile energy prices, Exxon and Chevron shares provide some stability versus pure upstream or downstream plays," wrote Kay, in a July 11 report.

He expects both firm's will continue to generate strong cash flow, which should result in dividend hikes and share buybacks.

Lower gas prices have traditionally resulted in increased travel on the part of most Americans, who in lieu of spending on a new car when their job future is unsure, keep the family chariot longer. This trend is seen helping two auto parts retailers, O'Reilly Automotive (ORLY) and Advance Auto Parts (AAP).


"Given the notable decline in gasoline prices since April, we expect miles driven to increase over the coming months, which in turn should lead to increasing vehicular repairs in the back half of the year," said Michael Souers, an S&P Capital IQ analyst, who has "buy" recommendations on the two firms.

And finally two deep discount retailers, Dollar Tree (DLTR) and Family Dollar Stores (FDO) are seen benefiting from lower gas prices, since a significant portion of spending on the part of lower income consumers is on gas, so the money saved there can be spent elsewhere. Given the economic uncertainties facing so many, they are likely to turn to discount retailers for general merchandise and food items, according to S&P Capital IQ equity analyst Joseph Agnese, who has "buy" recommendations on both firms.

1 of 3

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!

Markets

DOW 17,827.75 +12.81 0.07%
S&P 500 2,072.83 +5.80 0.28%
NASDAQ 4,787.3170 +29.0650 0.61%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs