(By Tim - iStockAnalyst Writer)
As the stock market continues to work its way lower one positive benefit for much of the economy and consumers is lower oil and energy prices. It is hard to believe that just a few months ago we were looking at $140 per barrel oil and wondering when it would hit $200. Now with oil under $75 I have been wondering: Who will benefit from these lower oil prices? The obvious come to mind first: Personal vehicle uses for all those who feel relief as they gas up their cars, pickups and SUVs. Then transportation companies: airlines, trucking companies and shippers will all feel the benefit of lower fuel costs. Of course, it is hard to imagine the airline executives being able to actually generate a positive return from lower fuel costs. (If you want to look at airline stocks see my article on 3 Latin American airlines that will definitely benefit from lower fuel costs). Truck and ship transport companies may have much less to transport in a global economic slowdown, thus negating the positive of lower fuel costs. The curious mind looks for another way to benefit from lower cost oil.
The U.S. Dept. of Energy reports that 18% of the crude oil used in the U.S. is for the production of petrochemical feedstocks, primarily for synthetic rubber and plastics. Companies that use petroleum to produce these products will benefit from lower raw material costs. Also, companies that manufacture products from rubber and plastics should have lower material costs. I have pulled of a few stocks in these industries that may end up with significant financial benefit from lower oil costs:
Chemical companies:
Du Pont (E.I.) de Nemours & Co (DD) Dow Industrials component has a current market cap of $29 billion, PE of 9 and yields 4.5%.
Dow Chemical Company (DOW) S&P 100 component with a market cap of $20 billion, PE is 8 and yield of 6.5%.
Eastman Chemical Co. (EMN) S&P 500 component with a market cap of $3.1 billion, PE of 9 and yields 3.8%.
Rubber and plastics products:
Goodyear Tire & Rubber Co. (GT) S&P 500 component has a market cap of $2.5 billion, the PE is 2.8 and they do not currently pay a dividend.
Cooper Tire & Rubber Co. (CTB) This small cap company has a market capitalization of $400 million, a PE of 6.7 and yields 5.7%.
Myers Industries Inc. (MYE) Another small company with a market cap of $300 million, PE of 9 and a yield of 2.5%.
The challenge for all of these companies is whether a slowing economy will slow sales faster than lower material costs can help margins. These company's customers are often manufacturers whose product sales may be strongly affected by the current economic conditions. On the other hand, products made from plastics and rubber are used everywhere for everything and many uses are for consumer staples like Coke, beer cups and tires. After market product providers like Cooper Tire and Myers Industries might benefit from the troubles of an OEM supplier like Goodyear. I provide the list above to possibly spark an interest to further your research into these companies. At their current valuations and yields, lower raw material costs may be a spark to increased profits.
