5 Stocks for the Fourth Quarter: Analysts

NEW YORK (TheStreet) -- The Bespoke Investment Group sees the fourth quarter as the best period for U.S. equities in 2011. Historical averages show that stock markets perk up in the last quarter of the year. In the last 20 years, the U.S. stock market averaged +4.57% in the fourth quarters, and advanced in 24 of 30 fourth quarters in the last 30 years with an average price return of better than 7%.

Also, Reuters polled 350 stock market analysts worldwide after the third quarter, and their forecast was that 18 of the 19 major world stock indices would either advance or post negligible losses in the fourth quarter. In addition, a Bloomberg survey of 12 Wall Street strategists in early October reveals that the 2011 fourth quarter rally would be the best in 13 years. The S&P 500 is forecast to surge 15% in the fourth quarter.

These five stocks from sectors like aluminum, technology, and automobile have potential upsides ranging from 24% to 44%. The average buy rating for these stocks is 75%, according to data compiled by Bloomberg. There are no sell ratings on these stocks.

The stocks are arranged in ascending order of upside potential.

5. CenturyLink ( CTL) is an integrated telecommunications provider offering a suite of services including voice, Internet, data and video. The company is scheduled to release its third quarter 2011 results on Nov. 2. Mid-September, CTL paid regular quarterly cash dividend of 72.5 cent per share. The stock is trading at a dividend yield of 8.2%.

Following the acquisition of Qwest, CTL launched an extensive rollout of its low-cost broadband services in Arizona and across the country, targeting low-income residents who have yet to adopt high-speed Internet services. This would help CTL tap into a large market of almost 35% of U.S. households that either still use antiquated dial-up service or are not connected to broadband at all.

For the third quarter of 2011, CTL expects net income of $213.1 million, or 34 cents per share. Sales are seen increasing multi-fold to $4.59 billion from $1.75 billion in the third quarter of 2010. Operating profit is expected to rise 31% to $662.67 million, while EBITDA is seen jumping 123% to $1.92 billion from the year-ago period. Gross margin is seen expanding to 37.10% from 12.64%, year-on-year. Cash flow per share is pegged at $2.43, up 22%.

For 2011 fourth quarter, revenue is seen at $4.58 billion on operating profit of $647.11 million, vs. revenue of $1.72 billion on operating profit of $486.37 million recorded in the same quarter prior year. Meanwhile, cash flow per share is seen rising 34% to $2.49 for the same period.

Seventy percent of the 23 analysts covering the stock rate it buy and the rest suggest a hold. There are no sell ratings on the stock. Analysts surveyed by Bloomberg foresee the stock gaining an average 24.2% to $43.79 over the next 12 months.

4. Apple ( AAPL) designs, manufactures and markets a range of personal computers, mobile communication and media devices, portable digital music players, and sells related software, services, peripherals, networking solutions, and third-party digital content and applications.

Apple recorded revenue of $28.27 billion for the fourth quarter of 2011, compared to $20.34 billion in the equivalent period last year. Also, net profit soared to $6.62 billion, or $7.05 per diluted share, compared to $4.31 billion, or $4.64 per diluted share, in fourth quarter 2010. Gross margin improved 340 basis points, while iPhone and iPad unit sales rose 21% and 166%, respectively, from the year-ago quarter. For the first quarter of 2012, AAPL estimates revenue of $37 billion and diluted earnings per share of $9.30.

The company announced that its iPhone 4S recorded sales of more than 4 million units, just four days after its launch. In addition, more than 25 million customers are already using the iOS 5 -- the world's most advanced mobile operating system -- within the first five days of release, and more than 20 million customers have signed up for iCloud, a breakthrough set of free cloud services.

Monday this week, it was known from a UBS research note that Apple would be investing almost $8 billion, up 73% from last year, in capital expenditures over the next 12 months. An estimated $900 million is seen directed towards the company's retail operations, while the remaining may be used for product tooling, toward manufacturing process equipment, for corporate facilities and infrastructure. In addition, Apple plans to open 40 stores in the next year with an estimated 30 outside the U.S., on rising international sales.

Of the 55 analysts covering the stock, 89% recommend a buy and the remaining rate a hold. There are no sell ratings on the stock. Data from Bloomberg has analysts forecasting the stock gaining 26.5% to $512.05 in the upcoming 12 months.

3. Schlumberger ( SLB) supplies technology, integrated project management and information solutions to the international oil and gas exploration and production industry. It operates in five segments: Oilfield Services, WesternGeco, M-I SWACO, Smith Oilfield and Distribution.

The company has declared a quarterly dividend of 25 cents per share on outstanding common stock payable Jan. 6, 2012 to shareholders of record Dec. 1, 2011. Recently, SLB's HiWAY flow-channel hydraulic fracturing service reached a milestone as it pumped in almost 3,000 stages in vertical and horizontal wells in 8 countries for more than 30 operators.

Third quarter 2011 revenue increased to $10.23 billion from $9.62 billion in the prior quarter and $6.85 billion in the same quarter previous year. Income from continuing operations excluding charges and credits attributable to SLB totaled $1.32 billion or 98 cents per diluted share, up 51% year-over-year and 12% sequentially.

For the fourth quarter of 2011, a consensus forecast of analysts polled by Bloomberg sees sales increasing 20% to $10.89 billion from $9.07 billion recorded in the corresponding quarter of 2010. Net income is estimated at $1.52 billion, or $1.11per share, compared to $1.15 billion, or 85 cents per share, in the prior-year quarter. Gross margin is seen growing to 27.48% from 20.64% earlier. Meanwhile, based on growth across product lines and geographies analysts indicate strong potential for growth in the upcoming months. Moreover, the company estimates the thin cushion of reserve oil supply would drive demand for future exploration and production activities.

Eighty-six percent of the 36 analysts covering the stock recommend a buy and the rest rate a hold. There are no sell ratings on the stock. Data from Bloomberg has analysts forecasting the stock gaining 28.0% to $94.04 in the upcoming 12 months.

2. Kaiser Aluminum ( KALU) engages in the production of semi-fabricated specialty aluminum products. Its business segments include fabricated products, secondary aluminum (value-added products), hedging, and corporate and other.

Mid-October, the company announced quarterly cash dividend payment of 24 cents per share on its outstanding common stock payable Nov. 15 to shareholders of record Oct. 25. Meanwhile, Wall Street analysts believe Kaiser Aluminum is a strong player in the aluminum industry in sharp contrast to giant Alcoa, based on improved stock performance and quarterly results.

For the third quarter of 2011, KALU recorded adjusted net income of $12 million, or 63 cents per diluted share, compared to $8 million, or 44 cents per diluted share, in the year-ago quarter. Net sales totaled $322 million from $263 million in the prior-year period. Improved demand drove value added revenue (fabricated products net sales less hedged cost of alloyed metal) to $161 million from $138 million in third quarter 2010.

Net income for the fourth quarter of 2011 is estimated at $11.80 million, or 62 cents per share, compared to net loss of $3.48 million, or 6 cents per share, in the year-ago quarter, as per a consensus estimate of analysts polled by Bloomberg. Sales are seen rising 23% to $326 million from $265.80 million in the fourth quarter of 2010.

Of the five analysts covering the stock, three recommend a buy and the rest rate a hold. There are no sell ratings on the stock. Analysts polled by Bloomberg expect the stock to gain an average 32% to $61.33 in the upcoming 12 months.

1. Ford Motor Company ( F), a producer of cars and trucks, also engages in the business of financing vehicles. The company's automotive operations are divided geographically into North America, South America, Europe and Asia-Pacific/Africa.

For the third quarter 2011, the company reported net income of $1.65 billion, or 41 cents per share. Meanwhile, sales increased to $33.1 billion from $29.89 billion in the same quarter prior year. For 2011 fourth quarter, Ford estimates net income to come in at $1.06 billion, or 46 cents per share, compared to $850.45 million, or 48 cents per share, in the year-ago quarter. For the quarter, sales are forecast at $32.4 billion. Gross margin is seen expanding to 13.87% from 12.84% earlier.

Recently, it was known that Ford Explorer surpassed the 100,000-vehicle sales mark for 2011, making it the fastest-growing midsize utility in the U.S. As compared to 2010 levels, retail sales of the Explorer jumped 290% in the U.S.

According to a median forecast of a Bloomberg survey, auto sales data for October, to be released Nov. 1, is seen increasing to 13.2 million, marking the highest since April, compared to 12.1 million in the prior month. Besides, Moody's Investors Service has upgraded Ford's corporate debt ratings to Ba1 from Ba2 citing new labor agreements and improved finances. The rating agency has assigned a positive outlook to the company and said it will consider further ratings increases. Recently, Standard & Poor's and Fitch also upgraded Ford.

Of the 21 analysts covering the stock, 71% recommend a buy and the rest rate a hold. There are no sell ratings on the stock. Data from Bloomberg has analysts forecasting the stock gaining 44.1% to $16.83 in the upcoming 12 months.

>>To see these stocks in action, visit the 5 Stocks for the Fourth Quarter portfolio on Stockpickr.

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