NEW YORK (TheStreet) -- Industrials underperformed the broader markets in the third quarter, as August's selloff wreaked havoc on most S&P 500 sectors. 

The S&P 500 Industrials Index fell 7.4% for the three-month period, ending Sept. 30, while the broader S&P 500 fell 6.9% -- its worst quarterly performance in four years - as a result of the quarter's choppy markets.

The sector had some clear winners. Airlines and aerospace and defense companies made up the top five best performing industrial stocks last quarter. Here are the 10 best-performing utilities stocks in the third quarter, paired with TheStreet Ratings to let you know if you should still buy these stocks in the final quarter of the 2015.

TheStreet Ratings uses a quantitative approach to rating over 4,300 stocks to predict return potential for the next year. The model is both objective, using elements such as volatility of past operating revenues, financial strength, and company cash flows, and subjective, including expected equities market returns, future interest rates, implied industry outlook and forecasted company earnings.

Buying an S&P 500 stock that TheStreet Ratings rated a "buy" yielded a 16.56% return in 2014 beating the S&P 500 Total Return Index by 304 basis points. Buying a Russell 2000 stock that TheStreet Ratings rated a "buy" yielded a 9.5% return in 2014, beating the Russell 2000 index, including dividends reinvested, by 460 basis points last year.


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10. Northrop Grumman Corp. (NOC)
Industry: Industrials/Aerospace & Defense
Market Cap: $30.8 billion
Year-to-date return: 4.6%

TheStreet Said: TheStreet Ratings team rates NORTHROP GRUMMAN CORP as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:

We rate NORTHROP GRUMMAN CORP (NOC) a BUY. This is driven by several positive factors, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its solid stock price performance, increase in net income, notable return on equity, good cash flow from operations and growth in earnings per share. We feel its strengths outweigh the fact that the company shows low profit margins.

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • Investors have apparently begun to recognize positive factors similar to those we have mentioned in this report, including earnings growth. This has helped drive up the company's shares by a sharp 28.30% over the past year, a rise that has exceeded that of the S&P 500 Index. Regarding the stock's future course, although almost any stock can fall in a broad market decline, NOC should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
  • The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and the Aerospace & Defense industry average. The net income increased by 3.9% when compared to the same quarter one year prior, going from $511.00 million to $531.00 million.
  • The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. In comparison to other companies in the Aerospace & Defense industry and the overall market on the basis of return on equity, NORTHROP GRUMMAN CORP has underperformed in comparison with the industry average, but has greatly exceeded that of the S&P 500.
  • Net operating cash flow has slightly increased to $626.00 million or 9.44% when compared to the same quarter last year. Despite an increase in cash flow, NORTHROP GRUMMAN CORP's cash flow growth rate is still lower than the industry average growth rate of 26.85%.
  • NORTHROP GRUMMAN CORP has improved earnings per share by 15.6% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. However, we anticipate underperformance relative to this pattern in the coming year. During the past fiscal year, NORTHROP GRUMMAN CORP increased its bottom line by earning $9.74 versus $8.34 in the prior year. For the next year, the market is expecting a contraction of 0.4% in earnings ($9.70 versus $9.74).
  • You can view the full analysis from the report here: NOC

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9. Republic Services Inc. (RSG)
Industry: Industrials/Environmental & Facilities Services
Market Cap: $14.4 billion
Year-to-date return: 5.2%

TheStreet Said: TheStreet Ratings team rates REPUBLIC SERVICES INC as a Buy with a ratings score of A-. TheStreet Ratings Team has this to say about their recommendation:

We rate REPUBLIC SERVICES INC (RSG) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its revenue growth, reasonable valuation levels, expanding profit margins, good cash flow from operations and increase in net income. We feel its strengths outweigh the fact that the company has had somewhat disappointing return on equity.

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • RSG's revenue growth has slightly outpaced the industry average of 4.5%. Since the same quarter one year prior, revenues slightly increased by 3.7%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • 38.55% is the gross profit margin for REPUBLIC SERVICES INC which we consider to be strong. It has increased from the same quarter the previous year. Along with this, the net profit margin of 8.23% is above that of the industry average.
  • Net operating cash flow has increased to $405.10 million or 24.30% when compared to the same quarter last year. In addition, REPUBLIC SERVICES INC has also modestly surpassed the industry average cash flow growth rate of 17.20%.
  • The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and greatly outperformed compared to the Commercial Services & Supplies industry average. The net income increased by 6.3% when compared to the same quarter one year prior, going from $179.00 million to $190.30 million.
  • You can view the full analysis from the report here: RSG

 

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8. Masco Corp. (MAS)
Industry: Industrials/Building Products
Market Cap: $8.8 billion
Year-to-date return: 7.4%

TheStreet Said: TheStreet Ratings team rates MASCO CORP as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:

We rate MASCO CORP (MAS) a BUY. This is driven by several positive factors, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth and solid stock price performance. We feel its strengths outweigh the fact that the company has had sub par growth in net income.

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • MAS's revenue growth has slightly outpaced the industry average of 1.3%. Since the same quarter one year prior, revenues slightly increased by 2.8%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • Compared to its closing price of one year ago, MAS's share price has jumped by 26.26%, exceeding the performance of the broader market during that same time frame. Regarding the stock's future course, although almost any stock can fall in a broad market decline, MAS should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
  • MASCO CORP's earnings per share declined by 11.4% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, MASCO CORP increased its bottom line by earning $2.36 versus $0.83 in the prior year. For the next year, the market is expecting a contraction of 51.3% in earnings ($1.15 versus $2.36).
  • The gross profit margin for MASCO CORP is currently lower than what is desirable, coming in at 34.63%. Regardless of MAS's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 5.44% trails the industry average.
  • Net operating cash flow has declined marginally to $291.00 million or 4.59% when compared to the same quarter last year. In conjunction, when comparing current results to the industry average, MASCO CORP has marginally lower results.
  • You can view the full analysis from the report here: MAS

 

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7. Waste Management Inc (WM)
Industry: Industrials/Environmental & Facilities Services
Market Cap: $22.6 billion
Year-to-date return: 7.5%

TheStreet Said: TheStreet Ratings team rates WASTE MANAGEMENT INC as a Buy with a ratings score of A. TheStreet Ratings Team has this to say about their recommendation:

We rate WASTE MANAGEMENT INC (WM) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its solid stock price performance, compelling growth in net income, notable return on equity, expanding profit margins and good cash flow from operations. We feel its strengths outweigh the fact that the company has had generally high debt management risk by most measures that we evaluated.

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • Looking at where the stock is today compared to one year ago, we find that it is not only higher, but it has also clearly outperformed the rise in the S&P 500 over the same period. Although other factors naturally played a role, the company's strong earnings growth was key. Looking ahead, unless broad bear market conditions prevail, we still see more upside potential for this stock, despite the fact that it has already risen over the past year.
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Commercial Services & Supplies industry. The net income increased by 30.5% when compared to the same quarter one year prior, rising from $210.00 million to $274.00 million.
  • The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Commercial Services & Supplies industry and the overall market, WASTE MANAGEMENT INC's return on equity exceeds that of both the industry average and the S&P 500.
  • 37.07% is the gross profit margin for WASTE MANAGEMENT INC which we consider to be strong. It has increased from the same quarter the previous year. Along with this, the net profit margin of 8.26% is above that of the industry average.
  • Net operating cash flow has increased to $816.00 million or 47.02% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 17.20%.
  • You can view the full analysis from the report here: WM

 

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6. C.H. Robinson Worldwide Inc. (CHRW)
Industry: Industrials/Air Freight & Logistics
Market Cap: $9.5 billion
Year-to-date return: 8.6%

TheStreet Said: TheStreet Ratings team rates C H ROBINSON WORLDWIDE INC as a Buy with a ratings score of A. TheStreet Ratings Team has this to say about their recommendation:

We rate C H ROBINSON WORLDWIDE INC (CHRW) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its revenue growth, impressive record of earnings per share growth, reasonable valuation levels, good cash flow from operations and solid stock price performance. We feel its strengths outweigh the fact that the company shows low profit margins.

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • CHRW's revenue growth has slightly outpaced the industry average of 0.6%. Since the same quarter one year prior, revenues slightly increased by 1.2%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • C H ROBINSON WORLDWIDE INC has improved earnings per share by 17.5% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past year. We feel that this trend should continue. During the past fiscal year, C H ROBINSON WORLDWIDE INC increased its bottom line by earning $3.05 versus $2.65 in the prior year. This year, the market expects an improvement in earnings ($3.45 versus $3.05).
  • After a year of stock price fluctuations, the net result is that CHRW's price has not changed very much. Although its weak earnings growth may have played a role in this flat result, don't lose sight of the fact that the performance of the overall market, as measured by the S&P 500 Index, was essentially similar. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
  • The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. In comparison to other companies in the Air Freight & Logistics industry and the overall market on the basis of return on equity, C H ROBINSON WORLDWIDE INC has underperformed in comparison with the industry average, but has greatly exceeded that of the S&P 500.
  • You can view the full analysis from the report here: CHRW

 

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5. Delta Air Lines Inc. (DAL)
Industry: Industrials/Airlines
Market Cap: $36 billion
Year-to-date return: 9.2%

TheStreet Said: TheStreet Ratings team rates DELTA AIR LINES INC as a Buy with a ratings score of A+. TheStreet Ratings Team has this to say about their recommendation:

We rate DELTA AIR LINES INC (DAL) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its revenue growth, expanding profit margins, good cash flow from operations, increase in net income and largely solid financial position with reasonable debt levels by most measures. We feel its strengths outweigh the fact that the company has had somewhat disappointing return on equity.

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • DAL's revenue growth has slightly outpaced the industry average of 7.3%. Since the same quarter one year prior, revenues slightly increased by 0.8%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • 36.57% is the gross profit margin for DELTA AIR LINES INC which we consider to be strong. It has increased from the same quarter the previous year. Along with this, the net profit margin of 13.86% is above that of the industry average.
  • Net operating cash flow has increased to $2,745.00 million or 33.51% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 12.99%.
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Airlines industry. The net income increased by 85.4% when compared to the same quarter one year prior, rising from $801.00 million to $1,485.00 million.
  • The debt-to-equity ratio is somewhat low, currently at 0.97, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Even though the company has a strong debt-to-equity ratio, the quick ratio of 0.34 is very weak and demonstrates a lack of ability to pay short-term obligations.
  • You can view the full analysis from the report here: DAL

 

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4. Lockheed Martin Corp. (LMT)
Industry: Industrials/Aerospace & Defense
Market Cap: $63.4 billion
Year-to-date return: 11.5%

TheStreet Said: TheStreet Ratings team rates LOCKHEED MARTIN CORP as a Buy with a ratings score of A. TheStreet Ratings Team has this to say about their recommendation:

We rate LOCKHEED MARTIN CORP (LMT) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its solid stock price performance, growth in earnings per share, increase in net income, revenue growth and notable return on equity. We feel its strengths outweigh the fact that the company has had generally high debt management risk by most measures that we evaluated.

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The stock has not only risen over the past year, it has done so at a faster pace than the S&P 500, reflecting the earnings growth and other positive factors similar to those we have cited here. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
  • LOCKHEED MARTIN CORP has improved earnings per share by 6.5% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, LOCKHEED MARTIN CORP increased its bottom line by earning $11.21 versus $9.04 in the prior year. This year, the market expects an improvement in earnings ($11.40 versus $11.21).
  • The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and the Aerospace & Defense industry average. The net income increased by 4.5% when compared to the same quarter one year prior, going from $889.00 million to $929.00 million.
  • Despite its growing revenue, the company underperformed as compared with the industry average of 5.1%. Since the same quarter one year prior, revenues slightly increased by 3.0%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Aerospace & Defense industry and the overall market, LOCKHEED MARTIN CORP's return on equity significantly exceeds that of both the industry average and the S&P 500.
  • You can view the full analysis from the report here: LMT

 

 

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3. Raytheon Co. (RTN)
Industry: Industrials/Aerospace & Defense
Market Cap: $32.8 billion
Year-to-date return: 14.2%

TheStreet Said: TheStreet Ratings team rates RAYTHEON CO as a Buy with a ratings score of A-. TheStreet Ratings Team has this to say about their recommendation:

We rate RAYTHEON CO (RTN) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its solid stock price performance, revenue growth, largely solid financial position with reasonable debt levels by most measures, reasonable valuation levels and good cash flow from operations. We feel its strengths outweigh the fact that the company shows low profit margins.

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The stock has not only risen over the past year, it has done so at a faster pace than the S&P 500, reflecting the earnings growth and other positive factors similar to those we have cited here. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
  • Despite its growing revenue, the company underperformed as compared with the industry average of 5.1%. Since the same quarter one year prior, revenues slightly increased by 2.6%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • The current debt-to-equity ratio, 0.53, is low and is below the industry average, implying that there has been successful management of debt levels.
  • Net operating cash flow has significantly increased by 114.85% to $376.00 million when compared to the same quarter last year. In addition, RAYTHEON CO has also vastly surpassed the industry average cash flow growth rate of 26.85%.
  • You can view the full analysis from the report here: RTN

 

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2. Precision Castparts Corp. (PCP)
Industry: Industrials/Aerospace & Defense
Market Cap: $31.6 billion
Year-to-date return: 14.9%

TheStreet Said: TheStreet Ratings team rates PRECISION CASTPARTS CORP as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:

We rate PRECISION CASTPARTS CORP (PCP) a BUY. This is driven by multiple strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures and expanding profit margins. We feel its strengths outweigh the fact that the company has had sub par growth in net income.

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The current debt-to-equity ratio, 0.47, is low and is below the industry average, implying that there has been successful management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.23, which illustrates the ability to avoid short-term cash problems.
  • 36.11% is the gross profit margin for PRECISION CASTPARTS CORP which we consider to be strong. Regardless of PCP's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, PCP's net profit margin of 16.54% compares favorably to the industry average.
  • PRECISION CASTPARTS CORP's earnings per share declined by 13.6% in the most recent quarter compared to the same quarter a year ago. The company has suffered a declining pattern of earnings per share over the past year. However, we anticipate this trend reversing over the coming year. During the past fiscal year, PRECISION CASTPARTS CORP reported lower earnings of $10.71 versus $11.95 in the prior year. This year, the market expects an improvement in earnings ($12.54 versus $10.71).
  • PCP, with its decline in revenue, slightly underperformed the industry average of 5.1%. Since the same quarter one year prior, revenues slightly dropped by 4.3%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • After a year of stock price fluctuations, the net result is that PCP's price has not changed very much. Although its weak earnings growth may have played a role in this flat result, don't lose sight of the fact that the performance of the overall market, as measured by the S&P 500 Index, was essentially similar. Despite the stock's decline during the last year, it is still somewhat more expensive (in proportion to its earnings over the last year) than most other stocks in its industry. We feel, however, that other strengths this company displays offset this slight negative.
  • You can view the full analysis from the report here: PCP

 

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1. Southwest Airlines (LUV)
Industry: Industrials/Airlines
Market Cap: $25.1 billion
Year-to-date return: 15%

TheStreet Said: TheStreet Ratings team rates SOUTHWEST AIRLINES as a Buy with a ratings score of A. TheStreet Ratings Team has this to say about their recommendation:

We rate SOUTHWEST AIRLINES (LUV) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its revenue growth, solid stock price performance, impressive record of earnings per share growth, expanding profit margins and largely solid financial position with reasonable debt levels by most measures. We feel its strengths outweigh the fact that the company shows weak operating cash flow.

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • LUV's revenue growth has slightly outpaced the industry average of 7.3%. Since the same quarter one year prior, revenues slightly increased by 2.0%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • Looking at where the stock is today compared to one year ago, we find that it is not only higher, but it has also clearly outperformed the rise in the S&P 500 over the same period. Although other factors naturally played a role, the company's strong earnings growth was key. Looking ahead, unless broad bear market conditions prevail, we still see more upside potential for this stock, despite the fact that it has already risen over the past year.
  • SOUTHWEST AIRLINES has improved earnings per share by 34.3% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, SOUTHWEST AIRLINES increased its bottom line by earning $1.65 versus $1.06 in the prior year. This year, the market expects an improvement in earnings ($3.47 versus $1.65).
  • 38.27% is the gross profit margin for SOUTHWEST AIRLINES which we consider to be strong. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of 11.89% trails the industry average.
  • The current debt-to-equity ratio, 0.38, is low and is below the industry average, implying that there has been successful management of debt levels. Despite the fact that LUV's debt-to-equity ratio is low, the quick ratio, which is currently 0.52, displays a potential problem in covering short-term cash needs.
  • You can view the full analysis from the report here: LUV