A catalyst that I believe will positively impact stock prices in the fourth quarter 2021 is Q3 earning season which kicks off this week.  This year’s first and second quarter finished with the average year-over-year earnings growth rates for the S&P 500 of 52.3% and 90.9%.  While I don’t expect that same kind of growth this quarter, growth is still expected to be strong. 

Right now, according to FactSet, the estimated year-over-year earnings growth rate for the third quarter is 27.6%. This would be the third-highest earnings growth rate since 2010. Considering that the actual figure has historically been a little higher than the estimate, the average growth could be as high as 35%, making it the third consecutive quarter of year-over-year earnings growth above 30%.

If we dig deeper into the sectors with the highest growth estimates, Materials and Industrials are way ahead. That’s why investors should consider stocks in these sectors, such as Ryder System, Inc. (R), Greif Inc. (GEF), and Westlake Chemical Corporation (WLK) that have high estimated earnings growth for the third quarter.

Ryder System, Inc. (R)

R is a provider of supply chain and fleet management solutions in the United States. The company offers fleet leasing, fleet maintenance, truck rental, dedicated transportation, and transportation management. It serves the automotive, consumer packaged goods, energy, food and beverage, industrial manufacturing industries, among others.

The company is benefiting from improving economic conditions and freight demand. Its Supply Chain Solutions segment is seeing new business and higher volumes. Its Fleet Management Solutions segment is benefiting from increased rental pricing. 

Management expects freight market conditions to remain strong into next year, so both segments should continue to gain. When combined with the likelihood of improved used vehicle sales, higher pricing in leases, and strong demand in commercial rental, it’s not surprising that management revised its current-year earnings per share guidance from a range of $5.50 to $5.90 to a range of $7.20-$7.50.

The company has an overall grade of A, translating into a Strong Buy rating in our POWR Ratings system. R has a Growth Grade of A as analysts expect earnings to rise 71.9% in the third quarter and 2,896.3% for the year. The company also has a Value Grade of B as its price-to-sales ratio of 0.5 is well below the industry average. 

We also provide grades for Momentum, Stability, Sentiment, and Quality, which you can find here. R is ranked #2 in the A-rated Trucking Freight industry. For more top stocks in this highly-rated industry, click here.

Greif Inc. (GEF)

GEF is a producer of industrial packaging products and services with manufacturing facilities located in many countries. The company offers a comprehensive line of rigid industrial packaging products, such as steel, fiber, plastic drums, rigid intermediate bulk containers, closure systems for industrial packaging products, and transit protection products.

The company has been seeing solid improvement in many of its end markets. For instance, the Global Industrial Packaging segment is seeing strong volume growth for chemicals, specialty chemicals, and lubricants. In the third quarter, GEF had solid volume performance across all major substrates, particularly in global rigid Intermediate Bulk Container (IBC). This is expected to continue in the fourth quarter.

The Paper Packaging & Services segment is benefiting from strong volumes in converting operations and higher selling prices. This is due to higher published containerboard and boxboard prices. The improving demand for textiles and protective packaging is driving tube and core volumes. That is also expected to continue in the fourth quarter. Plus, GEF’s debt reduction efforts should also aid growth.

GEF has an overall grade of A and a Strong Buy rating in our POWR Ratings system. The company has a Growth Grade of B, which makes sense as analysts forecast earnings to soar 100% year over year in the current quarter and 106.6% in the following quarter. GEF also has a Quality Grade of B as its current ratio of 1.3, indicating that it has more than enough liquidity to handle short-term obligations.

For the rest of GEF’s grades (Value, Momentum, Stability, and Sentiment), click here. GEF is ranked #1 in the Industrial – Packaging industry. For more top-ranked stocks in this industry, click here.

Westlake Chemical Corporation (WLK)

WLK is a vertically integrated manufacturer and marketer of basic chemicals, vinyls, polymers, and building products. Its products are used for flexible and rigid packaging, automotive products, coatings, refrigerants, and residential and commercial construction. 

The company has been benefiting from acquisitions. For instance, its acquisition of Axiall diversified its product portfolio and operations. In fact, it created a leader in olefins and vinyls in North America. Then the buyout of NAKAN enabled WLK to expand its product portfolio by boosting its compounding business worldwide.

It also added specialty products and technology. WLK is also benefiting from massive demand for its products. For example, there are strong demand trends for polyethylene. Management expects this demand in polyethylene to continue due to its use in specialty applications such as food packaging and healthcare.

WLK has an overall grade of B, translating into a Buy rating in our POWR Ratings system. The company has a Growth Grade of B as its earnings are expected to rise 504.7% year over year in the third quarter and 463.9% for the year. WLK also has a Value Grade of B with a trailing P/E of 13.59 and a forward P/E of 9.92.

To access all of WLK’s grades, including Momentum, Stability, Sentiment, and Quality, click here. WLK is ranked #12 in the B-rated Chemicals industry. For more top stocks in this industry, make sure to visit this link.

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This article was written by David Cohne, Chief Value Strategist for StockNews.com. David has helped investors find the most profitable stocks for over 20 years.

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R shares were unchanged in after-hours trading Tuesday. Year-to-date, R has gained 36.54%, versus a 17.11% rise in the benchmark S&P 500 index during the same period.

About the Author: David Cohne

David Cohne has 20 years of experience as an investment analyst and writer. Prior to StockNews, David spent eleven years as a consultant providing outsourced investment research and content to financial services companies, hedge funds, and online publications. David enjoys researching and writing about stocks and the markets. He takes a fundamental quantitative approach in evaluating stocks for readers. More...

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