Refiners
Refiners, who take crude oil and turn it into gasoline and other refined products, represent the only bright spot of the energy industry. The average price of gasoline, their main product, has also dropped—but not as much as oil prices, which has translated into improving profit margins. So while output prices have dropped, input prices have dropped even more, helping to explain why refiners have been able to boost earnings by a whopping 50% over the past 19 months.

Performance for the industry has been hurt recently, as markets fear that the lifting of the U.S. crude oil export ban may lead to increased costs for refiners. However, even when recent weakness is included, markets have been kinder to refiners than other areas of the energy sector, with the S&P Refining and Marketing Index showing flat performance between June 30, 2014 and February 19, 2016. Due to the improving earnings, valuations—as measured by price-to-earnings ratios (PE)—improved with the average PE cheapening to 7.8, below the overall S&P 500 average.

Hotels, Restaurants, and Leisure
All three of these segments have benefited from lower fuel prices as U.S. consumers take to the roads for vacation, leisure activities, and dining. The combination of more disposable income and lower fuel costs helps drive greater consumption of each, illustrated by the 12-month moving average of total distance traveled by Americans increasing by 3.4% between September 2014 and September 2015, a difference of more than 100 billion miles.

OTHERS MAY BENEFIT…BUT HAVEN’T YET

Transports

For the trucking industry, fuel costs have rivaled labor costs recently—typically a company’s largest expense. At an average of 34%, fuel and oil costs were one of the largest expenses for the trucking industry in 2014, topped only by driver wages and benefits at 35%. Low oil prices have resulted in improved profitability metrics over the past 18 months, with EPS increasing by 53%.

However, the market has not rewarded these improvements, with the S&P 500 Transportation Industry Index falling a cumulative 10% from June 30, 2014 to February 19, 2016, slightly worse than the S&P 500 Index. China’s economic slowdown, the strong U.S. dollar’s impact on trade, and a reduced need for transportation equipment domestically, as the shale oil industry and other commodity producers curtail activity, have caused investors to avoid transports. In addition, market fears of a continued economic slowdown in the U.S. and around the globe have pressured the sector. On a positive note, the trailing 12-month PE for the industry has fallen from 18.8 ( a premium versus the S&P 500) in June 2014, to 11.1 (a significant discount).

The rail industry is one subsector of the transportation industry that has particularly lagged. Lower fuel costs are a plus, but not nearly enough to offset decreased traffic as a result of lower commodity prices broadly, which is reflected in the sector’s relatively weak earnings growth.

Chemicals and Containers and Packaging
These sectors both use oil and natural gas as key inputs to production, but macroeconomic concerns have overshadowed financial benefits. Despite good earnings growth over the past 18 months, forward-looking markets have expressed more concern over future business prospects.

Automobiles and Household Durables
The stock prices of automobiles and household durables also reflect investors’ economic fears, despite each sector benefiting from consumers’ increased disposable income. The average household may save over $1,200 annually just due to lower gas prices (not to mention cost savings from lower heating oil or natural gas), savings they may choose to spend elsewhere. For example, autos have benefited from consecutive years of record sales, with total sales at or near all-time highs since 2013, and miles traveled reached a new record in 2015. These two categories of big ticket items have historically been economically sensitive, and rising recession concerns have begun to impact both, despite improving financial results from both sectors. One headwind thus far has been that consumers have increased savings, with the estimate of personal savings rising from 4.8% in the second quarter of 2014 to 5.5% in the fourth quarter of 2015. It is always possible, however, that this increase in savings may push spending forward and lead to benefits for these sectors in the long run.