What is a bane for energy stocks might just be a boon for the travel sector.

Drop in Gasoline Prices

According to the EIA (U.S. Energy Information Administration), average gasoline prices per gallon declined to around $2.78 in the beginning of Dec 2014. This reflects the lowest level for gasoline prices since Feb 2010.

A further drop is expected and prices are expected to hit around $2.60 per gallon in 2015. This came from a slump in crude oil prices which is currently trading at $49 per barrel down from $100 around July due to oversupply.

Gasoline prices are dependent on four factors: crude oil price, taxes, refining costs and marketing and distribution expenses. According to The Association for Convenience & Fuel Retailing, or NACS, crude oil costs account for about two-third of gasoline prices. The worldwide demand and supply for crude oil is a major factor in deciding gasoline prices.

The Declining Price of Gasoline Driving More Travel

According to AAA, almost 98.6 million travelers journeyed 50 miles or more from home during the year-end holiday season between Dec 23 and Jan 4. This reflects a 4% increase from the last year and the highest forecast growth rate for the number of year-end travelers since 2009.

With the U.S. economy on its way to recovery and increasing consumer confidence, more Americans are taking vacations. Further, declining gas prices have been an added incentive for consumers who are benefiting from a much-improved job market and consistent wage increases.

Our Choices

While the declining gasoline prices will favor the travel industry as a whole, we present three such stocks with a favorable Zacks Rank that likely made the most of this positive development.

The cruise industry is directly benefitting from lower energy prices in addition to the rebounding consumer spending toward the end of 2014.

Miami-based Carnival Corporation (CCL - Analyst Report) offers various cruise products and services such as vacation deals to various cruise destinations. The company also owns and operates 11 hotels and lodges, and nearly 300 motor-coaches and railcars. The company sells its services through travel agents, including wholesalers, general sales agents and tour operators. The company reported fourth-quarter 2014 earnings of 27 cents per share, beating the Zacks Consensus Estimate by 42.1%.

Carnival currently has a Zacks Rank #2 (Buy) and its stock has surged 22% over the past three months. Current year and current quarter estimates have also moved north, suggesting that it has more upside left.
 

Another Miami-based company, Norwegian Cruise Line Holdings Ltd. (NCLH - Snapshot Report), is a cruise line operator which offers cruises in North America, the Mediterranean, the Baltic, Central America, Bermuda and the Caribbean. The company reported third-quarter 2014 earnings of $1.07 per share, in line with the Zacks Consensus Estimate.

Norwegian Cruise Line has a Zacks Rank #2 and expected earnings growth of 130.4% for the coming quarter. Current year and current quarter estimates have moved upwards suggesting more good news ahead for the company.

Another cruise stock that we consider is likely to gain is Royal Caribbean Cruises Ltd. (RCL - Analyst Report). It operates as a cruise company worldwide, which also offers onboard dining, entertainment and other onboard activities. The company reported third-quarter 2014 earnings of $2.20 per share, beating the Zacks Consensus Estimate by 0.5%.

Royal Caribbean sports a Zacks Rank #1 (Strong Buy) and has expected earnings growth of 76.6% for the coming quarter. Rising estimates for both current year and current quarter indicate good news for the company.

Bottom Line
 
As the year progresses, we would like to advise investors to keep an eye on the oil prices which are expected to move further down helping the abovementioned stocks to yield abundant profits.