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.
S&P has its "buy" rated, upgrading it from "hold," on June 26, and has a $79 price target on its shares, which is an 18% premium to the current price. S&P analysts write that although its customer base of lower income families are expected to spend less in the near term, "we believe the company is well positioned to drive increases in both customer traffic and average customer transaction value with its growing consumables assortment and planned increases in national brand and private label offerings." It has also recently expanded its food assortment to include refrigerated foods and quick-prep and ready-to-eat products. Analysts' consensus estimate is for earnings of $3.65 per share this year, and growing 16% to $4.24 next year.