The crisis in Iraq has had a direct impact on global crude
prices. The consequent rise in gasoline price is expected to hurt
diverse businesses that are directly or indirectly dependent on
gasoline. The leisure industry, consisting of restaurants, tourism
and stores, is expected to be among the indirect victims of this
gasoline price increase.
Currently, the national average price of $3.67 per gallon, which is
the highest since 2008, the year gasoline hit its all-time high.
The average price has risen significantly since Memorial Day and is
expected to increase further. Due to the Iraq turmoil, people have
to shell out more owing to the hike in prices. As a matter of fact,
even before the Iraq turmoil, rising demand for fuel in the U.S.
and extensive maintenance of some Gulf Coast refineries reduced
gasoline output, thereby keeping the prices above average.
The leisure industry, which includes amusement and water parks,
movies, theaters, casinos and hotels, is expected to do less
business this time due to less affordability of Americans. The
leisure industry is also largely dependent on the airline industry,
which is likely to bear the brunt of the increase in gas prices.
Airlines have been steadily increasing fuel surcharges for
transatlantic flights and raising domestic airfares to cover costs.
With a further increase in gas prices, they would try to pass on
the cost to customers, thereby forcing business and leisure
travelers to reconsider their travel plans. People who prefer to
drive would hit the road less often to limit their spending on
fuel. Though it is difficult to pinpoint leisure stocks that would
be hurt by the increase, we have identified three stocks, which are
likely to feel the heat.
Cedar Fair, L.P.
) owns and operates amusement and water parks in the United States
and Canada. Rides at these amusement parks use gasoline to
operate. The rise in gas prices may translate into increased costs
for admission. This Zacks Rank #4 (Sell) company posted a loss of
$1.51 last month, which compared unfavorably with the Zacks
Consensus Estimate of a loss of $1.12 and the year-ago loss of 84
cents. Though revenues beat the consensus mark, it declined 3.0%
year over year to $40.0 million. Estimates for the company have
largely moved downwards for 2014 and 2015 over the last 60 days.
SeaWorld Entertainment, Inc.
), a theme park and entertainment company, may also be pressurized
by the same factors. This Zacks Rank #3 (Hold) company posted weak
first quarter results last month with a loss of 56 cents, wider
than the Zacks Consensus Estimate of a loss of 47 cents and the
year-ago loss of 49 cents. Revenues also missed the consensus mark
and declined year over year.
Thor Industries Inc.
), which manufactures and sells a range of recreational vehicles,
and related parts and accessories, is also likely to be affected by
the surge in prices. Expensive gasoline makes the use of motor
boats, recreation vehicles, and anything else that has a large
engine, costly. This Zacks Rank #3 (Hold) company's third quarter
fiscal 2014 earnings of $1.03 missed the Zacks Consensus Estimate
while revenues remained in line. Estimates for the company have
largely moved downward for the upcoming quarter, fiscal 2014 and
Apart from the core leisure companies, airline stocks like
Southwest Airlines Co.
United Continental Holdings, Inc.
) would likely be among the sufferers. Higher airfares would compel
travelers to either postpone their tours or use other means of
transport. The hotel industry also falls in the line of fire with
the RevPar of leading hoteliers like
Starwood Hotels & Resorts Worldwide Inc.
Marriott International, Inc.
) likely to be adversely affected.
Also, companies like
Speedway Motorsports Inc.
Dover Motorsports Inc.
) that promote motor sports entertainment would be impacted by the
Winnebago Industries, Inc.
) that manufactures and sells recreation vehicles primarily for use
in leisure travel and outdoor recreation activities is expected to
witness declining profits.
With individuals having to spend considerably more on fuel, visits
to casinos, resorts, restaurants, movie halls, and theaters would
automatically witness a decline, thereby hurting the business
Las Vegas Sands Corp.
Vail Resorts Inc.
), owner and operator of resorts in the U.S.;
Regal Entertainment Group
), operator of multi-screen theatres; and
AMC Entertainment Holdings, Inc.
), a motion picture exhibitor in the United States. Also,
revenues of Disney World, owned by
The Walt Disney Company
) - a popular destination for which people save all year would be
dampened. People would prefer to stay at home rather than dine out,
thereby pulling down the sales of restaurants like
Yum! Brands, Inc.
Additionally, higher gas prices would make customers reduce their
visits to retailers, thereby slowing down the revenues of stores
Wal-Mart Stores Inc.
The Kroger Co.
). They would also be more inclined towards essential purchases
rather than spending on toys and games, resulting in lesser
revenues for leading toys makers like
We would like to remind investors that besides the housing crisis,
a surge in gasoline prices was one of the leading factors that
pushed the economy into recession in 2008. Hike in fuel prices
would compel Americans to reconsider their travel plans, which
would have an adverse impact on several sectors and hinder the
economic momentum gained over the recent quarters.
Want the latest recommendations from Zacks Investment Research?
Today, you can download 7 Best Stocks for the Next 30 Days.
Click to get this free report
THOR INDS INC (THO): Free Stock Analysis Report
CEDAR FAIR (FUN): Free Stock Analysis Report
SEAWORLD ENTERT (SEAS): Free Stock Analysis
SOUTHWEST AIR (LUV): Free Stock Analysis Report
WAL-MART STORES (WMT): Free Stock Analysis
STARWOOD HOTELS (HOT): Free Stock Analysis
YUM! BRANDS INC (YUM): Free Stock Analysis
LAS VEGAS SANDS (LVS): Free Stock Analysis
KROGER CO (KR): Free Stock Analysis Report
MARRIOTT INTL-A (MAR): Free Stock Analysis
HASBRO INC (HAS): Free Stock Analysis Report
MCDONALDS CORP (MCD): Free Stock Analysis
MATTEL INC (MAT): Free Stock Analysis Report
DISNEY WALT (DIS): Free Stock Analysis Report
REGAL ENTMNT GP (RGC): Free Stock Analysis
UNITED CONT HLD (UAL): Free Stock Analysis
To read this article on Zacks.com click here.