Earnings season is in full swing, which makes this a good time to take stock of some of the companies and investment themes that have been outperforming expectations.

They're a mixed bunch, with companies like medically focused Danaher (NYSE:DHR) and pool-and-water-solutions company Pentair (NYSE:PNR) actually benefiting from the COVID-19 pandemic. Meanwhile, Axalta Coating Systems (NYSE:AXTA) and diversified industrial Illinois Tool Works (NYSE:ITW) are very much in recovery mode from the crisis.

Beat and a raise

Let's start with a glance at how all four did last quarter, how they've adjusted their outlooks, and what their valuations are right now.

Company

Third-Quarter Results

Fourth-Quarter Guidance

2020 Estimated P/E ratio

2021 Estimated P/E ratio

Danaher (NYSE:DHR)

14% core revenue growth compared to guidance for mid-to-high single-digit percentage growth

Core revenue growth in the low-double-digit percentage range

42.3

36.1

Pentair (NYSE:PNR)

Sales increased by 12%

Full-year sales guidance increased from $2.8 billion to $2.95 billion, and adjusted EPS range raised from $2.00-$2.20 to $2.35-$2.40

22.6

19.9

Axalta Coating Systems (NYSE:AXTA)

Net sales decreased by 7.2% compared to guidance for a 15%-20% decline

Full-year sales forecast to decline by 18%, with adjusted diluted EPS of $1.15-$1.20

29.9

16.6

Illinois Tool Works (NYSE:ITW)

Organic revenue declined by 4.6%

Full-year organic revenue now expected to decline by 11%-11.5%; that's better than the best-case scenario from the prior forecast of a 12%-17% decline

34.4

28.2

Data source: Company presentations

Danaher and Pentair, the pandemic beneficiaries

Danaher's coronavirus-related products (diagnostic tests for COVID-19, and life sciences solutions that other pharmaceutical companies are using as they develop vaccines and therapies) were responsible for all but 4% of the 14% year-over-year revenue growth generated in the third quarter.

In addition, management believes its long-term growth prospects have been improved thanks to surging diagnostic system sales (ostensibly to run COVID-19 tests) and the successful integration of Cytiva, a business it bought from General Electric that has made Danaher one of the leading players in the bioprocessing market. In a nutshell, Cytiva added upstream bioprocessing capability to Danaher's strong position in downstream bioprocessing.

Pentair's story is very different. After the pandemic forced people to undertake stay-at-home and social-distancing measures, they shifted more of their discretionary spending toward home and garden improvement. They also spent a lot more money on swimming pools, which is where Pentair comes in. Around 60% of Pentair's revenue comes from the residential market, with pool equipment being its leading revenue generator.

Given that its largest customer, the wholesale distributor Pool Corp., reported a whopping 27% year-over-year sales increase in the third quarter, it's reasonable to expect more strong growth from Pentair in the near future.

Axalta and Illinois Tool Works, the recovery plays

Given that coatings company Axalta typically generates around 66% of its sales from a combination of automotive refinishing and automotive original equipment manufacturing (OEM), it's always going to be a play on the state of the auto industry.

That hasn't always been a great thing recently, but the company looks set for growth in the next couple of years. First, the number of miles driven will surely improve as the economy opens up further, and that's likely to drive demand higher for refinishing. Second, automotive production is improving as plants are being reopened. All of this leaves Axalta looking reasonably priced on a risk/reward basis.

Illinois Tool Works is also in recovery mode after suffering a 27% year-over-year revenue decline in the second quarter. The company got hit particularly hard by the pandemic because it has exposure to markets like welding and auto manufacturing, both of which rely on plants being open. Meanwhile, its food equipment sales are likely to remain weak as a result of restaurants remaining closed or operating at limited capacities.

That said, the company's revenue bounced back by 29% sequentially in the third quarter -- although on a year-over-year basis, its organic revenue was down by 4.6%.

Illinois Tool Works is an impressive company with a strong recent history of improving its operating margins via self-help initiatives. Shareholders will be hoping it can continue that trend in order to counter any softness in its end markets.

A dart hitting a bullseye.

These stocks have been on target and then some in 2020. Image source: Getty Images.

Stocks to buy?

All told, Danaher and Illinois Tool Works are great companies, but their valuations look high given their earnings prospects. In particular, Illinois Tool Works' forward P/E ratio of 31 looks expensive given the uncertainty in its end markets. Between them, Axalta looks a better value option if you're seeking portfolio exposure to automotive OEM and the industrial sector in general -- just be aware of the risks that exposure will bring if long-term automotive production growth turns out to be anemic.

Danaher's end markets look set for solid growth in the future, but that anticipated good news is already priced into the stock, which is trading at 38 times forward earnings. All of this leaves Pentair as the most interesting investment option among these four on a risk/reward basis.