Back to top

5 Consumer Stocks to Avoid as Oil Price Sees Surprise Rise

Read MoreHide Full Article

Next time when you go to gas station for refueling you might have to shell out extra, as crude oil futures got a boost yesterday of over 5% to settle at $47.05 per barrel after OPEC members reached a consensus to curb the output for the first time in eight years. The group agreed to limit the oil production to a range of 32.5–33 million barrels per day from 33.4 million, per sources. The supply glut had pushed oil prices to as low as $26 a barrel in Feb 2016, from the highs of $100 a barrel in 2014. 

A rebound in oil prices may sound good for energy companies, but this may not go well down with consumers stocks. A rise in gas prices is always a pain for consumers, who change their spending pattern accordingly. They become more cautious and restrain from non-essential spending, such as dining out or going for a vacation. However, no major change is noticed in the consumption of gasoline. The end result is an overall decline in consumer spending, which is not good for the economy.

Gas prices have a direct bearing on consumer sentiment. A drop in gas prices enhance spending power, while an increase in the same left them with lower disposable income. OPEC’s decision to cut production comes at a time when the economy is about to mark its 58th Presidential Election and is heading toward the busiest part of the year –– the holiday season. So will it be easy for consumer-related companies to digest the news, for which the season accounts for a sizeable chunk of yearly revenues and profits.

Here we have highlighted five consumer stocks that might get restless over surging oil prices:

Here Are the Picks

Beware of G-III Apparel Group, Ltd. (GIII - Free Report) , the designer, manufacturer and marketer of apparel. The stock has plummeted roughly 34% year to date and carries a Zacks Rank #5 (Strong Sell). The Zacks Consensus Estimate for fiscal 2017 and 2018 witnessed a downward revision over the past 30 days.

Don’t let your portfolio fall prey to Signet Jewelers Limited (SIG - Free Report) carrying a Zacks Rank #5. The stock price of this retailer of diamond jewelry and watches has nosedived about 39% so far this year. Moreover, the Zacks Consensus Estimate for fiscal 2017 and 2018 moved downhill over the past 60 days.

Express Inc. (EXPR - Free Report) , which carries a Zacks Rank #5, also does not deserve a place in your choice of stocks. The share price of this specialty apparel and accessories retailer has tanked approximately 32% year to date. The Zacks Consensus Estimate for fiscal 2016 and 2017 declined over the past 60 days. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Another stock that you should forget for now is Sprouts Farmers Market, Inc. (SFM - Free Report) , the retailer of fresh, natural, and organic food in the U.S. The stock has plunged roughly 24.1% year to date and carries a Zacks Rank #5. The Zacks Consensus Estimate for 2016 and 2017 moved south over the past 60 days.

Red Robin Gourmet Burgers Inc. (RRGB - Free Report) is another touch-me-not stock carrying a Zacks Rank #4 (Sell). The share price of this operator and franchiser of casual-dining and fast-casual restaurants has tumbled about 27% so far in the year. The Zacks Consensus Estimate for 2016 and 2017 decreased over the past 60 days.

Looking for Ideas with Even Greater Upside?

Today's investment ideas are short-term, directly based on our proven 1 to 3 month indicator. In addition, I invite you to consider our long-term opportunities. These rare trades look to start fast with strong Zacks Ranks, but carry through with double and triple-digit profit potential. Starting now, you can look inside our home run, value, and stocks under $10 portfolios, plus more. Click here for a peek at this private information >>

Zacks Restaurant Recommendations: In addition to dining at these special places, you can feast on their stock shares. A Zacks Special Report spotlights 5 recent IPOs to watch plus 2 stocks that offer immediate promise in a booming sector. Download it free »

More from Zacks Analyst Blog

You May Like