3 Stocks You Want to Keep in Case Oil Rallies

Key Points

• As interest rates get cut, new business activity could boost oil demand moving forward, where these three stocks could deliver outsized returns for investors.
• Each with a different fundamental setup, the theme remains attached to bullish outcomes.
• Institutions are buying, and EPS forecasts suggest higher prices are coming.

There is a real disconnect between oil prices and the future growth expectations of the United States economy, especially now that the Federal Reserve (the Fed) has decided to cut interest rates in September 2025. Interest rates act as gravity on business activity and earnings potential, and the lever has been turned lower to help these two factors float more freely in the coming quarters.

Historically (and logically), more business activity represents more demand for oil, and the low inventories seen today due to past slowdowns could create a real bottleneck and spike in prices were the levels of activity and demand rise along with these lower interest rate environments.

That’s why investors might consider watching a handful of stocks poised to outperform should oil prices rise again.

Diversified across different industries, names like First Solar Inc. NASDAQ: FSLR, Southwest Airlines Co. NYSE: LUV, and even Transocean Ltd. NYSE: RIG. Operating in the energy sector and the transportation sector, these companies are exposed to the tailwinds and earnings per share (EPS) expansion paths that can bring stock prices higher in this potential scenario.

Energy Affordability: Where First Solar Thrives

When oil is as low as it is today, not many companies and consumers worry about the price of fuel and energy, since most of today’s sources become affordable at this level. The opposite is also true; if oil prices were to rise to the historically higher ends of the spectrum, users will likely start looking for alternatives in the energy space.

One of the most developed and readily available alternative energy sources is solar, which has understandably slowed down the oil affordability cycle.

However, that may change soon with this interest rate cut. According to the MarketBeat EPS consensus, Wall Street analysts are adopting this view today.

For the fourth quarter of 2025, the consensus suggests that First Solar can report $5.79 in EPS to deliver a jump of 82% from today’s $3.18 in EPS. As most investors know, where EPS growth goes, so does the stock price, which is where the price-to-earnings-growth (PEG) ratio comes into play.

This ratio attempts to measure whether tomorrow’s EPS growth has been priced into today’s prices or not, and a 0.4x multiple directly says 60% of First Solar’s EPS growth has yet to be priced in. This gap is reflected in how some Wall Street analysts have stood above the consensus price target of $228.80 today.

Mark Strouse from J.P. Morgan Chase now sees First Solar stock with a $262 target, implying a 23% upside from where the stock trades today, crystallizing the opportunity for investors.

Southwest Airlines’ Hedging Will Pay Off

Among all airlines, Southwest Airlines is the one that hedges its fuel costs the best, which isn’t much of a benefit when these costs are as low as they are today. However, when and if these costs begin to spike on a potential oil rally, then this ability will likely command a premium from markets.

In fact, this outlook is already being reflected in Southwest Airlines' valuation multiples today. On a price-to-earnings (P/E) basis, a 48.9x multiple stands head and shoulders above the transportation sector’s average of only 13.9x.

Seasoned investors will recognize that markets are usually willing to overpay for stocks they believe can outperform peers and the broader market. Southwest Airlines and its hedging ability will be a massive driver in this case, should the oil price rise.

This theme has been reflected in insider buying activity. The company’s director, Gregg Saretsky, just bought 3,345 shares of the stock ahead of this oil catalyst.

Transocean’s Advantage Lies in Drilling

Returning to the potential bottlenecks that may arise with new oil demand, drilling will become a strong area for EPS growth almost immediately. The reason is that a too-tight inventory situation will prompt replenishment immediately. Before more oil supply comes online, drilling must take place first.

This is why this $3.1 billion company can deliver on significant expansion from where it trades today, and why institutional buyers from American Century Companies justified a boost of 9.8% to their current Transocean stock holdings, getting them to a high of $60.7 million or 2.5% ownership in total.

Investors can view this as a vote of confidence, one tied to a favorable risk-to-reward ratio for buyers, considering how low this stock trades today, which is only 70% of its 52-week high.

A whiff of oil demand could deliver double-digit upside, if not more, and these buyers are all over that opportunity.

One final factor investors can carry over in this thesis is the MarketBeat EPS forecast for six cents in the fourth quarter of 2025, a significant jump from today’s reported loss of 10 cents. If oil demand comes back online, this profit swing is not only realistic, but it could also send the company’s market capitalization much higher than where it is today.