MGM Stock And 2 Consumer Discretionary Picks For Lower Oil Prices

Oil prices just dropped more than 2% as U.S. Iran hostilities paused, and that shift in energy costs and geopolitical risk could matter for your portfolio. Lower fuel and transport costs can ease pressure on household budgets, which may support parts of the consumer discretionary sector, while ongoing Middle East risks keep uncertainty in the mix. This article looks at how that news links to a curated screener of larger consumer discretionary stocks from the US, UK, Canada, Australia, and New Zealand, and highlights 3 stocks that appear positively exposed to this latest market turn.

BRP (TSX:DOO)

Overview: BRP is a Canadian manufacturer of recreational vehicles and boats, best known for Ski-Doo snowmobiles, Sea-Doo watercraft and Can-Am off-road vehicles that it sells through a global dealer network. Its line up spans all-terrain and side by side vehicles, personal watercraft, pontoons and marine engines, targeting leisure riders who spend on higher ticket outdoor experiences.

Operations: BRP generates about CA$9.0b in revenue from recreational vehicles, with sales spread across the United States, Canada, Europe, Asia Pacific and Latin America.

Market Cap: CA$6.2b

BRP gives you direct exposure to discretionary leisure spending through a portfolio of branded powersports and marine products. This comes at a time when lower oil prices can leave households with a bit more room for big ticket purchases. The company is pushing into electric models and connected features such as the BRP GO! app. It is also investing in a large new parts and accessories hub that supports recurring, higher margin revenue. At the same time, high debt levels, one off losses and guidance that points to only moderate revenue growth keep risk firmly on the table. If you want to understand where that balance of growth potential and financial pressure might leave BRP, there is more to unpack in the full story.

BRP’s push into electric models and higher margin accessories could be more important than the headline guidance suggests, especially when considering the 3 key rewards and 2 important warning signs

MGM Resorts International (MGM)

Overview: MGM Resorts International is a global gaming and entertainment company that runs casino resorts, hotels and online betting platforms, combining slots, table games, sports betting, iGaming, accommodation, dining and live entertainment for leisure, business and high end gaming customers.

Operations: MGM Resorts International generates about US$8.4b from Las Vegas Strip Resorts, US$3.8b from Regional Operations, US$4.6b from MGM China, US$0.7b from MGM Digital and US$0.2b from corporate and other activities.

Market Cap: US$11.7b

MGM Resorts International is tightly linked to consumer travel and leisure budgets, so a pullback in oil prices can matter. Cheaper fuel often leaves more room for trips to Las Vegas or regional casinos. MGM’s push into higher margin digital betting and luxury resort upgrades is intended to improve earnings quality over time. On the other side, the company carries high debt, thin current profit margins and large capital commitments in projects such as MGM Osaka, which could strain cash flow if conditions turn. There is also ongoing takeover speculation, active share buybacks and mixed analyst views on valuation. Together, these factors create a complex setup that many investors may want to understand more deeply before deciding how it fits into a consumer discretionary portfolio.

MGM Resorts International’s mix of casino resorts and digital betting often looks like a simple oil sensitive travel story, yet the real swing factor may sit inside the 2 key rewards and 3 important warning signs

Corporate Travel Management (ASX:CTD)

Overview: Corporate Travel Management is an Australia based company that organises and manages business and specialist travel, covering corporate trips, meetings and events, resources and sports travel, as well as leisure, loyalty and wholesale travel and accommodation services across Australia and New Zealand, North America, Asia and Europe.

Operations: Corporate Travel Management generates A$60.9m from Asia, A$126.2m from Europe, A$319.9m from North America, and A$181.4m from Australia and New Zealand, reflecting a revenue base spread across key global travel markets.

Market Cap: A$2.2b

Corporate Travel Management may appeal to investors who think lower oil prices can support a rebound in corporate and premium travel. The company already has global scale across North America, Europe, Asia and Australia and New Zealand, yet still carries a relatively low 5.3% return on equity and profit margins that have slipped from 15.3% to 9.2%. Forecast earnings growth of 18.61% a year and solid revenue growth expectations are presented alongside high quality earnings, but they come with a P/E of 35.2x, funding entirely reliant on external sources and highly illiquid trading. That mix of travel leverage, valuation tension and balance sheet risk is a key part of the current investment narrative for Corporate Travel Management.

Corporate Travel Management’s growth story looks fast paced, yet the high 35.2x P/E and funding risks suggest investors may be missing a key twist that sits inside the analyst forecasts for Corporate Travel Management

The 3 stocks in this article are only a starting point, since the full Consumer Discretionary Stocks screener surfaced 42 more companies with equally compelling consumer spending stories. Use Simply Wall St to identify and analyze the specific catalysts and narratives that matter to you, so you can focus on the highest conviction ideas in this corner of the market.

Take Control of Your Investment Journey

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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